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For many individuals who find themselves in overwhelming debt due to unexpected medical bills or unpaid tax debts, bankruptcy offers a fresh start and a way to begin recovering financial stability. While filing for bankruptcy may lower an individual’s credit score temporarily, there are several ways to increase the score after going through bankruptcy.

Bankruptcy and credit reports

Both chapter 7 and chapter 13 bankruptcy may offer benefits to individuals who are having trouble paying their bills. People who have a steady income may qualify for chapter 13, which may stop foreclosure proceedings and allow the filer to pay off secured debts within three years.

According to the U.S. Courts, once an individual completes all payments under the chapter 13 plan, he or she receives a discharge. This legal ruling releases the individual for any debts covered by the bankruptcy plan. Within a few years after the discharge, the chapter 13 information may drop off the individual’s credit report, allowing him or her to improve the score.

Repairing credit scores

The FTC lists steps an individual may take to repair his or her credit history. According to the FTC, every person has the right to a free copy of his or her credit report once every year. Individuals also have the right to dispute outdated items or errors within their reports.

An individual must make a written request to a creditor when disputing an item on his or her credit report. The law requires credit reporting companies to investigate and resolve disputed items.

After going through bankruptcy, an individual may improve his or her credit score by following good financial practices. The FTC states that credit counseling organizations may provide information on budgeting and money management.