Rebuilding Credit after Filing Bankruptcy

It’s normal to be concerned about the credit score after filing bankruptcy. Rebuilding credit is important because a credit score can affect many things, such as interest on loans, insurance premiums and employment opportunities. Many potential clients ask if they have to wait seven years in order to mortgage a home or purchase a car. Fortunately, there’s no need to wait that long to begin rebuilding credit. In fact, it’s best to begin the rebuilding process as soon as the bankruptcy discharge is entered.

Take the following steps to improve your credit score after completing bankruptcy:

1. Review your Credit Reports: After receiving the bankruptcy discharge, obtain a copy of your credit reports from all of the major credit reporting agencies. You are entitled to one free report every twelve months from each agency. If you haven’t received your free reports, you can visit the Annualcreditreport.com web site to get them. Once you receive the reports, review them for errors. Debt that has been discharged in bankruptcy should show a zero balance. If there are errors on the credit report, you can send a dispute letter to the credit reporting agency to have the information corrected.

2. Obtain Credit: In order to rebuild credit, it is necessary to have credit. If you reaffirm a car loan during your bankruptcy case and you continue to make all payments before the due date, your credit score will gradually improve. Another option is to obtain a credit card. When searching for a credit card, it’s important to avoid applying for a lot of accounts at once because that can hurt your credit score. Some banks have tools that allow you to view cards that you are qualified for before applying. For example, the Capital One card finder tool allows you to search for cards for rebuilding your credit without affecting your credit score. You can also look for a secured credit card that requires a deposit in order to use the account since they’re easier to get. Remember to make sure that any debt you obtain is reported on your credit report since creditors are not required to report accounts and smaller companies might decide to forego the cost of doing so.

3. Make Debt Payments on Time: Once you obtain credit, use it responsibly and make sure that all of your payments are made before the due date. Try to pay the full balance every month and be patient. A huge jump in credit score will not happen overnight, but  within a couple of years, your credit score should be significantly higher.

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What Happens During a 341 Hearing?

After filing a bankruptcy case, the court sends out a notice containing the date and time for a 341 Hearing. The 341 hearing is also referred to as a Meeting of Creditors. A small group of people is scheduled for the same day and time.

After the debtor’s case is called, the debtor is sworn to tell the truth and the bankruptcy trustee reviews the debtor’s social security card and driver’s license.

Most of the trustees in the Eastern District of Michigan start with some verification questions. They want to verify that that all of the debtor’s creditors and assets were listed in the bankruptcy schedules. Then the trustee may ask specific questions about the bankruptcy petition and schedules that were filed with the court. In most cases, creditors do not attend the meeting. However, if a creditor does attend, the creditor will also have the opportunity to ask questions. Most debtors are surprised by how little time they spend at their meeting.

Discharging Student Loans

In most cases, student loans cannot be discharged in bankruptcy. However, you may be able to discharge your student loan if you qualify because the repayment of the student loan results in an “undue hardship” to you. In reviewing your request for a discharge of your student loans, the bankruptcy court will consider the following:

1. Are you unable to maintain a minimum standard of living if you have to repay the student loans?

2. Will your financial hardship remain the same for the amount of time it will take to pay off the loan?

3. Have you made a good faith effort to repay the student loan?

If you become permanently disabled, there is a good chance that you may qualify to have your student loans discharged in bankruptcy.  You can also apply directly to the federal government to discharge federal loans without filing bankruptcy if you become permanently disabled.  Feel free to contact Redd Law, PLC at 248-327-3872 for more information.