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Can I Rebuild My Credit During a Chapter 13 Bankruptcy?

Published April 1, 2022 by Sasser Law Firm
Can I Rebuild My Credit During a Chapter 13 Bankruptcy?

Bankruptcy is a legal process that helps people find relief when they fall behind on payments and become overwhelmed by debt. The decision to file for bankruptcy can be difficult to make, but bankruptcy can be the best way to achieve a fresh financial start in many cases.

When you initiate bankruptcy proceedings, you can file under several different “chapters.” A Chapter 13 bankruptcy allows debtors to make affordable payments over a fixed period in exchange for having most of their debts wiped clean.

Chapter 13 repayment plans typically last three to five years. If you have filed for Chapter 13 bankruptcy or are thinking about filing soon, you may be wondering what you can do during that time to rebuild your credit score. The attorneys of Sasser Law Firm are here to answer all your questions about whether Chapter 13 hurts your credit and how to boost your credit score while in Chapter 13.

How Long Does Bankruptcy Stay On Your Credit Report?

Many people are hesitant to file for bankruptcy when they learn that bankruptcy can remain on their credit reports for up to 10 years. However, you should know that this 10-year rule only applies to Chapter 7 bankruptcy cases.

So when does a Chapter 13 bankruptcy come off your credit report? When you file under Chapter 13, the bankruptcy only stays on your credit report for up to seven years after filing. For example, if you have a five-year repayment plan, the bankruptcy will only remain on your credit report for two years after you have completed the plan.

Can You Pay Off a Chapter 13 Bankruptcy Early?

You can pay ahead or even pay off a Chapter 13 plan at any time but that may not always result in an immediate discharge and could result in an unfavorable plan modification being sought by the trustee or the holder of an unsecured claim. This is a matter that should be discussed with your attorney so that the risks and benefits can be evaluated.

Best Practices for Rebuilding Your Credit During Chapter 13

Here are some steps you can take to begin rebuilding your credit while you are in the process of completing a Chapter 13 bankruptcy plan:

  • Open a “credit builder” card or loan to establish a consistent payment history
  • Ask a family member or close friend to add your name to their old credit card
  • Ask a family member or close friend to co-sign any loans you take out
  • Review your credit report for inaccuracies and then dispute them as needed

Are There Legal Restrictions on Incurring Debt during a Chapter 13 Case?

In the Eastern District of North Carolina, there is a local rule of bankruptcy procedure that requires a court order be obtained prior to debt being incurred in excess of $10,000.00.

Is It Possible to Qualify for Consumer Debt While in a Pending Chapter 13?

Yes. Credit cards, vehicle loans, and even residential mortgage loans can be obtained during a chapter 13 case. The most difficult of the loans is the mortgage loan but it is possible after the bankruptcy case has been pending for a period of time.

Contact an Experienced Chapter 13 Attorney in North Carolina

If you have questions about filing Chapter 13 bankruptcy or rebuilding poor credit, contact the bankruptcy specialist attorneys of Sasser Law Firm. We can address your concerns and provide straightforward advice during your free initial consultation. Call us or contact us online today to learn more.

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