A Lending Tree study found that most people who file for bankruptcy recover with a credit score of at least 640 within a few years. Some people in Louisiana may be among the 40 percent whose credit score reached 640 within a year. Within two years, nearly two-thirds had this score.
The study also found that terms for loans got more favorable within a few years of bankruptcy. While the costs for a $15,000 auto loan were $2,171 within a year of bankruptcy, the same costs dropped to $799 two or more years later. People who were able to get their credit scores above 720 after three years were offered APRs similar to those who had the same scores and no bankruptcy on their records.
There are a few steps people can take to rebuild credit after a bankruptcy. People can start by making a plan for recovery. This may include looking at what caused the bankruptcy in the first place. Some bankruptcies may have been caused by events outside a person's control, such as job loss, but in other cases, a person may have simply overspent. People should try to get a gas or retail credit card to begin rebuilding credit and showing they can use it responsibly. They should also pay bills on time and try to pay more than the minimum.
A person who is struggling with debt may want to discuss options with an attorney as well as any potential misconceptions. For example, some people might also think they will lose all their assets if they file for bankruptcy. However, even in a Chapter 7 bankruptcy, a person might declare some assets exempt. Filing for bankruptcy will also put an immediate stop to all creditor actions including harassing phone calls and lawsuits.