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Bankruptcy & Your Credit Score

Posted by Jeffrey Butwinick | Mar 14, 2023 | 0 Comments

Bankruptcy is a tradeoff. It typically wipes away debt that you can't afford to pay, but it tells the world that you're a credit risk. The bankruptcy may be noted on your credit report for 7 to 10 years, but it doesn't  impact your ability to obtain credit that entire time. For example, many people are able to get credit cards shortly after getting a bankruptcy discharge. You can even get a car loan shortly after filing for bankruptcy - although maybe at a high interest rate.

Many people considering filing for bankruptcy already have low scores. In those cases, bankruptcy will actually increase your credit score. This happens because bankruptcy will clear negative items from your credit report – leaving only the bankruptcy itself as a negative remark.

You can take immediate steps to begin restoring your creditworthiness after your bankruptcy is discharged.  

Here are some tips:

  1. Consider reaffirming "good" secured home and auto loans as part of your bankruptcy.  By reaffirming a loan, you are agreeing that the bankruptcy will not apply to the loan.  You will typically receive positive credit reporting for paying on a reaffirmed loan after the bankruptcy. (A good secured loan, for example, is a loan that has a low interest rate secured by an asset with ample equity).
  2. Consider a credit-builder loan if you need money and have the means to repay the loans. Community banks and credit unions most commonly offer these loans at affordable interest rates. If you borrow $500 or $1,000 and pay it off on schedule, it will become part of your credit report and will help improve your score.
  3. Open a secured credit card account. Credit card issuers will give you a secured card if you deposit cash that covers the credit limit. If you want a credit card with a $1,000 spending limit, you'll post $1,000 to the card issuers as a security deposit. Though this might seem strange at first, it offers the convenience of paying with plastic and, if you make payments when they're due, your credit score will improve.
Want more info? Please contact me at your earliest convenience to schedule a free consultation to discuss the specifics of your case.
You can also self-schedule an appointment by going here:
Jeffrey H. Butwinick, Esq.
7800 Metro Parkway Suite 300
Bloomington, MN 55425
T. 651-210-5055
F. 651-560-7135

About the Author

Jeffrey Butwinick

Practice Areas Jeff specializes in providing legal counsel to small business clients, and assisting clients in their personal and/or business bankruptcy petitions. He also helps people who have been subjected to illegal collection efforts. Current Practice Areas: Personal bankruptcy, small b...


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