People who are considering filing for bankruptcy may be concerned about its potential impact on their ability to obtain credit. But in reality, bankruptcy gives you a fresh start not only by discharging debts but also by allowing you to rebuild your creditworthiness. Although your credit score might take an initial hit, you can begin restoring it immediately.

It is true that a bankruptcy stays on your credit report for some time. A Chapter 7 bankruptcy will remain on your credit report for 10 years. If you reorganize your debts under Chapter 13, the bankruptcy will stay on your credit report for seven years. In either case, the report will also show the specific debts that have been discharged, so creditors can see that the slate is clean.

Here are some proactive steps you can take to start repairing your credit:

• Create a budget — When you’re rebuilding your credit, it’s essential to create a manageable budget and to hold to it. Tracking your expenses and cutting back on spending can help you avoid repeating past mistakes and build your credit moving forward.
• Pay current bills on time — Avoiding late or missed payments on any debts that were not discharged in bankruptcy should be a priority. Punctuality in payment has a significant impact on your credit score.
• Apply for credit — A common misconception is that people filing for bankruptcy won’t be able to qualify for credit cards or other loans until the bankruptcy leaves their report. But you may be able to obtain a secured credit card, or an unsecured card with a low limit, and you can build up your credit score if you make timely payments.
• Apply for loans with a cosigner — Asking a family member or trusted friend to cosign a loan is another way of reestablishing credit as long as you make timely payments. Be mindful, however, that any late payments or defaults will cause your cosigner’s credit score to suffer.
• Regularly monitoring your credit — It’s a good idea to check your credit score frequently to ensure that your report is accurate and to keep track of your progress in improving your score. If you find any errors in your report, you should dispute them with the credit reporting agency.

Repairing your credit after having your debts discharged in bankruptcy can take some time. By being diligent and developing good financial habits, you can begin to see your hard work pay off sooner rather than later.

If you are considering filing for bankruptcy, the Law Offices of James C. Zimmermann can help. With offices located in Hackensack, Vernon, Wayne, Pompton Lakes, and Nutley, New Jersey, we provide effective assistance for all bankruptcy matters, including counseling on credit restoration. For a free consultation, call 973-764-1633 or contact us online.