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Chapter 7 or a Chapter 13 bankruptcy generally remains on your credit report for up to ten years. Nevertheless, immediately after filing bankruptcy, you can take steps to start rebuilding your credit.  

Bankruptcy clients report that a number of credit companies often seek recent bankruptcy filers to extend credit to (for example, vehicle loans).  Why would lenders be willing to do this?  The reason is that credit agencies know that you are wiping out all or most of your debts and cannot file a Chapter 7 again for at least eight years.  Therefore, with the modern competitive lending environment, credit, at least for the time being, appears to be available to the recently bankrupt.  However, obtaining credit may be more expensive than before and credit limits will likely be lower.  

A key factor to improving your credit rating is making payments on time. By not filing bankruptcy, debtors continue to miss payments, thereby further damaging their credit rating. By filing bankruptcy, negative reporting due to nonpayment of debts may potentially stop immediately. Thus, you may begin re-establishing credit faster by keeping current on your house, vehicle, utilities and/or other payments .

Although filing bankruptcy may harm your credit rating, it has been reported that a bankruptcy filing and discharge can often improve a person's FICO credit score within 1.5 to 2 years. While a bankruptcy filing frequently remains on one's credit report for ten years, such bankruptcy filing can have long-term positive effects in the long run because of a lesser percentage of debt on your credit report and the new found ability to keep current on new or existing obligations.

One way that you can rebuild your credit score after bankruptcy is by obtaining a secure credit card. With a secured credit card, you can only charge up to the amount that been deposited in the bank as security for payment on the card.  Using a secured credit card results in reporting to the credit bureaus of extended credit and may help reestablish your credit.

In summary, if a person or family is in serious financial distress and can't pay their debts, their credit score will likely continue to decline anyway.  Thus, bankruptcy may possibly provide you with an opportunity to begin to repair your credit more quickly than if you don't file for bankruptcy relief.

Of course, bankruptcy is not intended to be a convenient financial planning device to provide a person with a head start, but, rather, as a last resort to provide a financially burdened person or couple with a "fresh start."

Remember this, it is not your credit score that truly reflects your financial strength.  What makes you truly credit worthy is a steady income stream and savings.  

Given the nature of the financial climate that we are currently experiencing, one cannot predict one's financial future with certainty.  However, it is anticipated that if you file bankruptcy and receive a discharge of debts, that, over time, the bankruptcy's negative effect on your credit will diminish over time.

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Under the new bankruptcy laws, Matthew Tozer is a debt relief agency because he helps people file for bankruptcy relief under the Bankruptcy Code.

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