Restoring Credit after Bankruptcy

Hundreds of thousands of personal or Chapter 7 bankruptcies are filed each year. Poor spending habits, loss of a job, and unmanageable medical expenses are just a few of the reasons.

Bankruptcy gives you a fresh start. Most if not all of your debts are washed away or discharged, giving you the chance to start all over with a clean slate.

Whether you've already filed for bankruptcy protection or are thinking about it now, you may be wondering if you'll ever be able to restore your credit. Yes, you can.


Wiping out your debts means, of course, your credit rating takes a hit. And the effects may be long-term. Generally, your personal bankruptcy stays on your credit report for 10 years. Anyone who looks at your report sees how much debt was wiped out. The net effect: Your credit score goes down and you're probably considered a credit risk.

Making yourself less of a risk means rebuilding your credit. It may take some time and some effort, but it can be done. There are things you can do before and after your bankruptcy is finalized.


While you're tinkering with the idea of bankruptcy, you can take steps to help your future credit rating:

  • Do some soul searching. Figure out exactly how you got into trouble in the first place. For instance, if overspending and splurging got you in trouble, vow to write a budget after your bankruptcy. If it was unexpected or emergency expenses, come up with a savings plan to help with future emergencies
  • Do your best to pay off some of your debts. Paying off one two bills completely may make a big difference in how your post-bankruptcy credit report looks
  • Don't apply for new credit cards or loans. Every time you do, a credit inquiry goes on your credit report and it doesn't look good


After your bankruptcy if finalized, it's time to take serious steps toward actually rebuilding your credit. Paying by cash is an excellent way to stay out of debt, but if you want to restore your credit you need to borrow money from someone and repay it. Here's what to do:

  • Check your credit report after your bankruptcy. Make sure it shows your discharged debts
  • Don't apply for too much credit all at once. Remember, each credit card or loan application is noted on your credit report and too many may scare of potential creditors
  • Look into a secured credit card -you have to deposit and keep at least the amount of your limit with the bank that issues the card. Make sure the card reports to the three major credit bureaus, too
  • You may be able to get an unsecured credit card, but expect higher interest rates than your pre-bankruptcy cards
  • Make payments on time. Pay your monthly bill on time every time. Having late- or slow-pay entries on your post-bankruptcy credit report is one of the worse things you can do
  • Don't use it all. Using every penny of your credit card limit hurts your credit score
  • Monthly payments? Some financial experts suggest paying off your credit card balance in full each month. Others suggest paying off small balances over time. You decide. Whatever you do, pay at least the minimum amount due and pay on time

10 Years Later

Ten years is a long time, but don't fall asleep on your credit. The most important thing to do is make sure you're in the clear.

A few weeks after the 10-year anniversary of discharge date, get a copy of all three of your credit reports. Make sure the bankruptcy isn't noted on the reports. If it is, write a letter to the credit bureau disputing the entry. Also, file a dispute with the bureau online.

After that:

  • Check your credit reports at least once a year to make sure the bankruptcy or discharged debts don't reappear
  • Stick to budget and savings plans
  • Don't "forget" about your bankruptcy. It may not be on your credit report anymore, but if you file an application and a credit card company or loan officer asks if you've ever filed for bankruptcy, you must answer, "Yes." Saying otherwise is fraud and illegal

Bankruptcy is a big step with long-lasting effects. But, you can recover and truly get a fresh start.

Questions for Your Attorney

  • Can someone file more than one bankruptcy?
  • Isn't it discrimination to deny a loan or credit card based on a 10-year-old bankruptcy?
  • Should my spouse look for anything specific on her credit reports if only I filed bankruptcy?
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