How Can I Repair My Credit After Bankruptcy?

TRI Writer • November 7, 2019

Kenneth C Rannick pc, Kenneth C Rannick bankruptcy, Rannick bankruptcy attorney, tennesee bankruptcy attorney, Georgia bankruptcy attorney, Tennessee bankruptcy lawyer, Georgia bankruptcy lawyer, declare bankruptcy in Tennessee, declare bankruptcy in georgiaPetitioners who file for Chapter 7 bankruptcy receive a clean financial slate through the bankruptcy discharge that erases liability for eligible debts. Many delay filing for bankruptcy even when doing so could greatly benefit them because they are afraid to damage their credit score. Potential filers delaying for this reason would do well to consider the current state of their credit score. Most people considering filing for bankruptcy are already past due on their accounts. In many cases, the petitioner’s credit score was in a sad state before they ever filed due to maxed out credit, past due account, poor payment history, etc. If you are worried that filing for bankruptcy means you will never have decent credit again, you can stop worrying.

Filing for bankruptcy does not mean that your credit will forever be damaged. If you were eligible to file for bankruptcy, the chances are good that your credit score was already on the low end of the scale. Whether or not filing for bankruptcy will result in a lower credit score depends on where your credit score was when you filed. In some cases, when the credit score was already low due to the factors mentioned above, a bankruptcy filing can result in a credit score increase.

Regardless of what your credit score was when you filed or what it was immediately after filing, you can begin to restore your credit right away. The bankruptcy will remain on your credit report for ten years, but the impact of your bankruptcy fades with time. Bankruptcy filers can help decrease the harmful effects of their bankruptcy by offsetting the information with positive reports of on-time payments and careful use of secured credit.

Restoring Your Credit After Bankruptcy:

  1. A Light Debt Burden: Lenders want to see that you have enough income to pay your current obligations with a little to spare. The discharge of debt creates an immediately lighter debt burden for borrowers, which makes you, in one sense, a more attractive borrower. Remember this as you move forward rebuilding your credit and always aim to keep your debt burden “light” even after you have restored your credit.
  2. Create a Budget: Use the information you learned in your pre-discharge credit counseling to create a budget.
  3. Start an Emergency Fund: Keeping as little as $250 in savings can help individuals and families avoid resorting to credit card debt or payday loans that can easily begin a negative financial trend.
  4. Create a Credit Restoring Strategy: For most, the simplest and most effective strategy is to obtain a secured loan or secured credit card. Both are “secured” by funds belonging to the “borrower” that are held as collateral. While the lender takes no risk, you get the benefit of a “credit” account that reports to the credit reporting agencies. Use the credit sparingly, but consistently. Pay balances off each month or carry extremely small portions of the balance over month to month to ensure that the lender will report a low balance and on-time payments. These positive reports will offset any adverse reports on your credit report and assist you as you rebuild your credit. Always pay on time. Never carry a balance higher than approximately 30% of the available limit (10% or less is even better).

For assistance filing for bankruptcy or more information about rebuilding your credit after bankruptcy, please get in touch with the experienced Tennessee and Georgia bankruptcy attorneys at Kenneth C. Rannick P.C. We help good people through bad times every day, and we can help you, too.

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Subchapter 5 Bankruptcy: Unlocking New Possibilities for Tennessee Residents

January 30, 2024
Are you a Tennessee resident facing financial challenges and considering bankruptcy? If so, you may have heard about a relatively new option called Subchapter 5 bankruptcy. But what exactly is Subchapter 5 and how does it differ from traditional Chapter 11 bankruptcy? More importantly, what benefits does it offer to individuals and small businesses?  In this blog post, we will explore the world of Subchapter 5 bankruptcy and shed light on its advantages for Tennessee residents. Whether you're a struggling entrepreneur or an individual burdened by overwhelming debt, understanding the potential benefits of Subchapter 5 can help you make informed decisions about your financial future. What is Subchapter 5 Bankruptcy? Subchapter 5 is a relatively recent addition to the United States Bankruptcy Code, specifically designed to provide a streamlined and cost-effective bankruptcy process for small businesses and individuals. It was created as part of the Small Business Reorganization Act (SBRA) in 2019, with the aim of increasing accessibility to Chapter 11 bankruptcy relief. The Benefits of Subchapter 5 Bankruptcy Simplified Process: One of the key advantages of Subchapter 5 is its simplified and faster bankruptcy process. Unlike traditional Chapter 11 bankruptcy, which can be complex and costly, Subchapter 5 offers a more streamlined approach that is better suited for small businesses and individuals. Retention of Ownership: Under Subchapter 5, business owners have the opportunity to retain ownership and control of their company while developing a repayment plan. This allows for greater flexibility and the ability to restructure debts without losing ownership interests. Reduced Plan Requirements: Subchapter 5 eliminates certain stringent plan requirements that are typically associated with traditional Chapter 11 bankruptcy. This simplification of the plan process makes it more accessible to small businesses and individuals. Debt Repayment Plan: Subchapter 5 allows for the development of a debt repayment plan based on the individual's or small business's disposable income. This plan spans over three to five years, making it more manageable and achievable for debtors. Creditor-Friendly Approach: Subchapter 5 encourages creditor participation and collaboration, promoting consensual resolutions and a more amicable environment. This can lead to increased cooperation, reduced litigation costs, and ultimately, a more successful restructuring process. Subchapter 5 vs. Chapter 11 Bankruptcy: Understanding the Difference While both Subchapter 5 bankruptcy and traditional Chapter 11 bankruptcy share some similarities, there are significant differences between the two. The primary distinction lies in the complexity, cost, and requirements associated with each option. Subchapter 5 offers a more simplified and accessible bankruptcy process specifically tailored to the needs of small businesses and individuals, while Chapter 11 is better suited for larger businesses with more complex financial structures. If you're a Tennessee resident grappling with financial difficulties, Subchapter 5 bankruptcy may provide a viable solution. Its streamlined process, reduced plan requirements, and debtor-friendly approach make it an attractive option for small businesses and individuals seeking relief from overwhelming debt. Before making any decisions, it's essential to consult with a qualified bankruptcy attorney who can guide you through the process and help determine the best course of action for your specific situation. Remember, bankruptcy is not a one-size-fits-all solution, and the outcome will depend on various factors. However, understanding the potential benefits of Subchapter 5 bankruptcy can empower you to make informed decisions about your financial future. At Kenneth C. Rannick, P.C., we specialize in bankruptcy law and can provide the guidance and support you need during challenging times. Contact us today to schedule a consultation and explore your options for a fresh start. Take control of your financial future with Subchapter 5 bankruptcy. Let us help you navigate the path to a brighter tomorrow.

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