How Can I Improve My Credit Score After Filing for Bankruptcy in Arizona?

Chances are, if you are behind on your bills because of a job loss or layoff, divorce or medical catastrophe, your credit score has taken a hit from insufficient payments on your credit cards, medical bills, car payments, or even your mortgage.

If you are out of work due to COVID-19 closures or are in between jobs as the market struggles to recover from the pandemic, account delinquencies can quickly become foreclosure or repossession notices that will negatively affect your credit score for years to come.

Credit scores aside, the severe and long-lasting effects of losing your home or vehicle can cause severe stress and anxiety, making your financial issues seem insurmountable. Filing for bankruptcy may be your best option for resolving your financial issues and getting a fresh start.

Our Tucson bankruptcy attorney, Eric Ollason will outline your financial recovery options, including whether Chapter 7 bankruptcy or Chapter 13 bankruptcy is right for your circumstances. Then we can begin working on boosting your credit score.

How Long Will a Personal Bankruptcy Remain on My Credit Report?

Personal bankruptcy can remain on your credit report for up to ten years.

The type of bankruptcy, why it was filed, and whether you completed the terms of the plan or if you received a discharge will all factor into your credit score, as will your post-bankruptcy financial behavior.

Your credit score should improve significantly if all your unsecured debt was discharged during Chapter 7 bankruptcy proceedings, as your debt will be eliminated.

If you reorganize your debt through Chapter 13 bankruptcy, your score will also improve after your unsecured debt is discharged.

Paying your monthly Chapter 13 plan payments to the Trustee in full and on time throughout your Chapter 13 case will result in your agreement being listed as current on your credit report. This will also help boost your credit score while you repay the agreed amount within the terms provided.

What Else Can I Do To Improve My Credit Score After an Arizona Bankruptcy?

If you are eligible to file for bankruptcy in Arizona, we can help you formulate a plan for staying out of debt once the bankruptcy has been finalized.

Although your credit score may see some growth when the filing is completed, there are several financially responsible options you may pursue to continue building your credit score going forward.

They may include:

• Paying all your monthly bills on time and in full. 

This may be the most important aspect of staying ahead of your debt. Review your debt-to-income ratio frequently, so you do not find yourself under water again after bankruptcy. Simply put, adjust your monthly bills to reflect only the requirements, and forego excessive expenditures to ensure you can stay on top of the bills you have before adding to them.

• Obtain a low-limit unsecured credit card or a fully-secured credit card. 

It is not uncommon for individuals and couples who successfully file for bankruptcy to start receiving credit card offers right away.

While we caution our clients against getting new credit cards soon after bankruptcy, as the interest rates are typically very high and can impose an unnecessary debt cycle, a secured or low-limit unsecured credit card may help rebuild your credit.

Responsible credit use is important, which is why a secured card could work for your needs, without requiring a monthly payment. Secured credit cards allow you to deposit a minimum amount, typically $500 or so, which will allow you to use the card against the sum. This means you will not have to pay a monthly payment, but you will receive the benefit of a positive report from the credit card company back to the credit reporting agencies.

If you obtain an unsecured credit card, consider using it only for emergencies or for items that you can pay off each month.

• Consider a car loan. 

Like credit cards, auto loans are obtainable after bankruptcy, but at higher interest rates due to your filing. If you need a new-to-you vehicle, do not let this dissuade you.

Purchasing a vehicle and making the monthly car payment in full and on will effectively increase your credit score over the first few months or year of your loan. Once your credit rebounds, you may be eligible to refinance your vehicle loan at a lower interest rate.

Demonstrating post-bankruptcy financial responsibility in the months and years following your bankruptcy filing may result in lenders offering you better terms and lower interest rates.

Get the Financial Help You Deserve During a Free Bankruptcy Consultation in Arizona Today

If you are overwhelmed by debt and are considering which bankruptcy option might be right for you, contact our Pima County and Tucson bankruptcy attorney, Eric Ollason, today by calling (520) 791-2707 to discuss your case during a free consultation. There is no obligation, and our conversation will remain completely private. We are here to help provide solutions for our Arizona residents, beginning with a free consultation.