There is no doubt that bankruptcy significantly lowers your credit score. But the effect is not as dramatic as many people believe it is. Furthermore, bankruptcy is a one-time black mark. Continual late payments drive your credit score lower each month. Finally, bankruptcy looks better than repossessions, foreclosures, and other events which indicate that the debtor simply gave up.

The lower credit score certainly should not deter people from filing a necessary bankruptcy. The benefits, like the Automatic Stay and debt discharge, are too good to pass up. The Automatic Stay immediately halts all creditor adverse actions. And, most unsecured debts, like credit cards and medical bills, are dischargeable in bankruptcy.

All that being said, rebuilding credit after bankruptcy is a priority for most people. A Georgia bankruptcy lawyer can help make that happen. While there is no guarantee, by following a few simple steps, many people can put bankruptcy in their rearview mirror much faster than they imagined.

Remember What You Have Learned

This point usually involves the “whew” effect. Many former bankruptcy debtors feel like they dodged a bullet, so they revert to their same pre-bankruptcy financial habits. Granted, the financial storms of life, such as job loss and divorce or separation, mostly cause most bankruptcy filings. However, after a financial disaster of this magnitude, there is plenty of blame to go around. So, do not relax after a bankruptcy. The next financial storm is probably just around the corner.

Bankruptcy, especially a Chapter 13 bankruptcy, helps families build better financial habits. When the case ends, keep making the monthly debt consolidation payment, at least for a while. But instead of paying the trustee, pay yourself. Set up an account at another bank, arrange for automatic deductions, and voluntarily disable online access. That way, it will be harder to stop the monthly debit.

On a related note, remember to be upfront about your credit history. Bankruptcy is nothing to be embarrassed about. If you tell future lenders about your credit history at the beginning, you might pay a higher interest rate, but you will probably get the loan.

Build a Reserve

Another way to instill financial discipline is to make additional payments on secured debts, like your mortgage or vehicle loan. Add about 5 percent to each payment. You will not miss the $100 or so, and after just a few months, you’ll have a sizable reserve.

Assuming the note has no prepayment penalty, retiring the debt several months early could save your family hundreds of dollars. Perhaps more importantly, the reserve builds goodwill with creditors. When you have future financial problems, you can skip a payment, or perhaps the lender will defer a payment or two to the end of the note.

Be sure to designate the extra as a principal payment. Otherwise, the bank will treat it as prepaid interest, and you will not build additional equity in the property.

Georgia Bankruptcy Attorneys and Credit Card Acquisition

At first blush, it seems odd to encourage former bankruptcy debtors to acquire more consumer debt. But your credit score measures your ability to manage credit, and not your ability to pay for everything in cash.

Most people have no problem acquiring credit cards after bankruptcy. Banks know that debtors cannot obtain another discharge for several years. So, the only real problem is deciding which offer to take. Select a card with a low credit limit which is easy to expand. Also, if possible, your credit card should not include a “secured” notation on your credit report. That note diminishes the positive impact on your credit score.

If the bank does not offer terms like these, your Georgia bankruptcy lawyer can negotiate on your behalf. These banks know if they do not make favorable deals, the customer will go somewhere else.

Once you have the card, charge something on it every month. Before the end of the month, pay more than the minimum balance, but carry a small balance over to the next month. That way, the bank makes a bit of money, and that looks good to lenders.

Seek Assistance from an Experienced Bankruptcy Lawyer in Athens, GA

It is rather easy to rebuild your credit after bankruptcy. For a free consultation with an experienced Georgia bankruptcy lawyer, contact Morgan & Morgan, Attorneys at Law, P.C. at (706) 843-2905. Convenient payment plans are available.

Lee Paulk Morgan

Lee Paulk Morgan

With more than 41 years of experience in the areas of Bankruptcy, Disability, and Workers’ Compensation, Lee Paulk Morgan is one of the most respected Bankruptcy and Disability attorneys in Athens, Georgia. His tireless dedication to serving clients has gained him the reputation of a premier attorney in his areas of practice, as well as the trust and respect of other legal experts, who often refer clients to him.