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Restoring Your Credit after Bankruptcy

Repairing Credit in Michigan

One of the very reasons why so many people struggle with the decision to file for bankruptcy is because they are afraid of what will happen to their credit if they file. First of all, it's important to realize that before most people file for bankruptcy their credit has already been damaged. It's not uncommon for people to be extremely delinquent on their credit cards or medical bills to the point where the creditors have charged them off, and it's not uncommon for peoples' vehicles to have already been repossessed prior to filing. In cases such as these, the damage has already been done.

Don't let fear over what will happen to your credit bar you from filing for chapter 7 or chapter 13 bankruptcy if you would truly benefit from doing so. Contrary to popular belief, it can be far easier to rebuild one's credit following discharge than if one chose not to file at all, or if they let the debt sit there and accumulate interest and penalties, or if the person chose to slowly chip away at it over a number of years.

Credit Cards are Your Friend

Once a bankruptcy is discharged, you have to realize that credit cards are your friend, not your enemy. Even if you've sworn off credit cards forever, it's important to understand that when it comes to re-establishing your credit, not only are they your first step, but they are your best friend.

Fortunately, there are a number of secured credit card offers and other credit card offers that give people a second chance. While your initial balance will be low, and your interest rate high, you can still shop out cards and compare offers over the internet. However, as long as you pay off your balance every month, you won't have to worry about paying interest.

It's recommended that you get two or three of these credit cards, keep your charges to less than 20 or 30 percent of the credit line (this shows creditors self-control), and pay all or most of the balance off each and every month. After demonstrating good payment habits and exercising self-restraint, you can anticipate getting credit line increases and becoming a more attractive consumer for better credit card offers in the next year or two.

Tips for Improving Your Credit Score

Going about rebuilding your credit is very similar to establishing good credit in the first place.

If you wish to restore your credit as quickly as possible following discharge, it's important to adhere to the following principles:

  • Make sure you have a regular and steady source of monthly income coming in.
  • Make a budget and stick to it.
  • Save at least 10 to 20% of your paycheck for a rainy day.
  • Don't live beyond your means.
  • Try to remain as stable as possible, especially maintaining a residence at one place for a significant period of time if you can (this makes you appear stable to potential lenders).
  • Very important – pay all of your bills on time!
  • Keep your credit card balances low, maxed out credit cards are not a good thing.
  • Determine what got you into this situation and take the necessary steps to ensure history doesn't repeat itself.

By maintaining a regular and steady source of income, developing a sound budget and sticking to it, and by taking out credit cards and maintaining a very low balance and paying all your bills on time, you can put yourself on the right track to restoring your credit in no time.

For those who actively work to restore their credit following a bankruptcy discharge, they can often get auto loans and even home loans within two to three years after discharge. It just takes a good work ethic and discipline to restore your credit once more. The good news is that since you can't file bankruptcy again for a number of years, many lenders may find you a more attractive borrower now than if you still had all of that debt counting against your debt to income ratio.

Small Changes Reap Big Rewards

For some people, finding balance in their budget so they can be solvent comes down to making some changes in their spending habits. Such changes may include buying the black coffee from Starbucks instead of the Iced Mocha, or brown-bagging lunch instead of eating out every workday. Or, it may involve clipping coupons or buying generic instead of the name brand. Every little bit counts and sometimes these minor changes can add up to huge savings, and more available money to put aside for that rainy day that hopefully never comes.

To learn more about credit restoration, please contact the Hensel Law Office, PLLC to schedule your initial consultation with our Michigan bankruptcy attorney.

Client Testimonials

  • Tom Hensel is definitely the right attorney to call!

    “I was referred to Tom Hensel by a friend. My first impression was not only was Tom professional but he's so kind and caring too. He helped my husband and I through an embarrassing, scary situation and definitely made it more positive one. He guided us through our options and helped us make the right decision for us which ended up being a chapter 7 bankruptcy. Tom was so knowledgeable and helped us throughout the whole process. He never once made us feel uncomfortable or dumb when we had questions. He was also very easy to get a hold of when questions would come up and would always return our calls and emails promptly. I strongly recommend Tom to anyone going through this kind of financial nightmare. Do yourselves a favor and call him right away. He will help you get on the right path again. Our only mistake was waiting so long to call him!! When we in court waiting our turn all the other attorneys referred to their clients as "The debtors" Tom on the other hand acknowledged us by our names. Little things mean a lot and that left a lasting impression with us. Tom Thank You again for all your help!!”

    Stacy S.

  • Professional, competent, empathetic attorney.

    “My husband and I were forced into a position to file for Chapter 7 bankruptcy. We were devastated and mortified that we had to choose that route, but Tom eased our stress about the filing and court hearing process, as he thoroughly explained what Chapter 7 entails, as well as exactly what to expect during and after the filing process; he was accurate on each point that he advised us on. Tom also kept in frequent contact with us and responded quickly to any questions or concerns that we had while we worked with him. Tom's expertise and tact was invaluable for us, and we will absolutely recommend him to any of our friends and relatives that may find themselves in similar positions to ours. Thank you, Tom, for your dedicated help during this process.”

    EJO

  • We have and will continue to recommend you to others in need of a fresh start.

    “Dear Tom, my husband and I wanted to express our deepest thanks for the help you gave us during our embarrassing and stressful time. I was very impressed that you returned every phone call in a timely manner. You were able to explain exactly what was going to happen in words that "we" could understand. You answered every question we threw at you. The whole bankruptcy process from start to finish was complete in the time you told us it would take. Your professionalism yet friendliness made the whole experience for us almost enjoyable... almost! We have and will continue to recommend you to others in need of a fresh start.”

    Melissa

  • Mr. Hensel walked me through every step.

    “I would highly recommend the Hensel Law Office!! Mr. Hensel walked me through every step, got my garnishments stopped very quickly (even got garnished wages returned to me!) and told me what to expect along the way. He answered all of my questions in a very timely manner- no matter what time I sent an email or gave him a phone call. Also, I felt his price was very reasonable compared to some of the other places that I called. Mr. Hensel answered plenty of questions that I had before I even became a client.”

    Carl

  • He is respectful and down to earth with his approach to very complicated legal matters.

    “Hensel Law Office has helped me during a very difficult time in my life. Tom has done a wonderful job with my Chapter 13 case. He always kept in touch with me and explained everything in terms I could understand. I would highly recommend Mr. Hensel to anyone who is facing any bankruptcy filing. He is respectful and down to earth with his approach to very complicated legal matters.”

    Sandra