Thompson Law Group, P.C.

Credit record can be rebuilt by simple steps after bankruptcy

A Pennsylvania resident filing a Chapter 7 bankruptcy can usually eliminate all credit card and medical debt, while generally keeping all personal property and belongings. The federal exemptions are available to a bankruptcy filer in Pennsylvania -- they provide sufficient exemptions for most personal property, including autos, bank accounts, retirement funds, and home furnishings. There are limits in each category, but usually a consumer Chapter 7 filing does not result in the taking of personal property by the bankruptcy trustee.

A large amount of unsecured debt can be quickly and permanently erased in a Chapter 7 bankruptcy. An individual or married couple are given a final discharge order by the federal bankruptcy court. The final bankruptcy order, however, is reportable on the debtor's credit record for up to 10 years for a Chapter 7.

Some consumers are reluctant to consider bankruptcy because they feel or have heard that their credit will be ruined. However, when a consumer is essentially "overloaded" with debt, it is usually true that the person's credit will worse without a bankruptcy filing. A bankruptcy clears out that debt and creates a stronger credit record than one that continues to fester with unresolved accounts.

After the bankruptcy, it is possible to obtain a secured or prepaid credit card. If the consumer pays the full amount off each month and pays on time, that will be a positive factor in re-establishing credit. Furthermore, a home can be usually retained in a Chapter 7 if there is a mortgage that is paid up to date. Car loans may also be kept current during and after the bankruptcy.

The mortgage and car loan payments will be reported and are a strong factor in re-establishing credit for a Pennsylvania consumer. A combination of such accounts can bring the score up to a respectable level usually within a few years after the bankruptcy. The bankruptcy itself will continue to be reported but, in some cases, even that will fall off of the consumer's public record years earlier than the period allowed by law.

Source: The Huffington Post, "How to Rebuild Your Credit After Bankruptcy -- Fast", Curtis Arnold, Oct. 15, 2014

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