Bankruptcy is a serious financial option that is available to individuals who have large sums of debt they don't think they can climb out of. Declaring bankruptcy allows individuals to consolidate and sometimes eliminate their debts, saving them from accruing interest and making it possible for them to rebuild their credit and financial lives. Bankruptcies remain on your credit report for up to 10 years and will kill your credit score, but you can take steps to rebuild your credit after a bankruptcy and recover from your financial situation.
Step 1
Start paying your bills on time. Whether it's utilities or home and auto loans, prompt payments get reported to credit bureaus and make your credit score rise. Even with a bankruptcy on your record, you can still salvage a credit score--roughly 35 percent of your score is the result of timely bill payments.
Step 2
Obtain a secured credit card or use a current card to spend frugally. Secured credit cards may have monthly and/or annual fees associated with them, but if they're your only line of credit, they're essential to your credit score. Whatever type of card you have, keep your spending under 30 percent of the card's limit, and pay off your balance in full every month.
Step 3
Review your credit report for errors. You can get a free copy of your credit report once a year from each of the three main bureaus (Equifax, Experian, TransUnion). Go over all the listings to make sure they're accurate. If they aren't, contact the companies that filed the claim against you and ask for proof that the debt is valid, or to remove it if found to be false.
Step 4
Begin paying off debts listed on your credit reports, and request that the creditor change these listings to paid once the debt is paid.
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