O'Brien Law Firm, LLC - Bankruptcy

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How to rebuild credit after filing for bankruptcy

After Mississippi consumers have filed for bankruptcy, they may be concerned about rebuilding their credit. However, they should be wary of companies called credit repair agencies that offer to help with this.

Under the Credit Repair Organizations Act, it is not legal for a company to charge for this type of service until the repair has been done. Some credit repair agencies will send out letters to people who have filed for bankruptcy, while others will advertise online or on TV. The companies claim to be able to establish a new credit identity for people who have filed for bankruptcy, but some of them suggest applying to the IRS for an Employer Identification Number. People are then instructed to use this number in place of their Social Security number. However, this number is intended for business use, and using it in this way can be illegal.

A bankruptcy can remain on a credit report for up to 10 years, but there are other steps people can take to repair their credit. One is applying for a secured credit card. This allows a person to deposit a certain amount to cover the credit offered and establish a regular payment record. The person can then transition to regular credit cards. Another way is to apply for a bad credit car loan.

How to reestablish credit is one of several concerns people may have when considering bankruptcy, but being unable to keep up payments for debt also hurts a person’s credit. An attorney may be able to outline debt relief options, including bankruptcy. Depending on a person’s income and other factors, it may be possible to file for either Chapter 7 or Chapter 13 bankruptcy.