According to the Wall Street Journal, personal bankruptcy filings are up 32% from 2008. Sometimes, your personal financial situation is so bad, bankruptcy is the only option. While bankruptcy may wipe your financial slate clean, unfortunately, it will also kill your credit score and stay on your credit report for at least 10 years.

While filing bankruptcy may hurt your credit for the first few years, you can take steps to rebuild your credit.

The first and most important thing to remember is to not to get back in a situation where you end up over your head in debt. I’m not saying that all bankruptcy filings are a result of irresponsibility. Bad things happen to good people. People lose jobs unexpectedly, people have health problems, people get divorced, etc. I will say it again, sometimes bad things happen to good people.

The second thing is to pay all bills on time. Even though your utility companies or cell phone companies don’t show up on your credit report, they will likely show up on your credit report if they go into default.

You will need to demonstrate to future creditors that have learned your lesson and you can be responsible. One way to build or rebuild your credit is to apply for a secured credit card. Secured credit cards work like regular credit cards except that your credit line is usually secured by a savings account that you maintain with the bank. Many of these cards don’t have a monthly and/or annual fee. You can find a list of prepaid cards here.

Building your credit score up will not happen overnight but with patience, time and responsible behavior, your credit score will improve.

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  1. Financial Tips // February 2, 2010 at 7:32 AM  

    Most people believe that a bankruptcy filing remains on their credit report, and it's near impossible to get a loan. Fortunately, if you take the necessary steps to rebuild your credit, you can qualify for loans relatively quickly after filing for bankruptcy. The key is to demonstrate responsibility with credit immediately after your bankruptcy case is closed.

  2. Debt Kid // February 2, 2010 at 5:45 PM  

    As someone who went through a bankruptcy 2 years ago, and has since rebuilt their credit, I can say it is very possible.

    Getting a secured card is a good step, I got one of them pretty quickly after my bankruptcy.

    There are also a few cards with low credit limits ($300, $500 etc) that you can get approved for even with a recent bankruptcy.

    My score is above 640 now, after being under 500 after my bankruptcy, so, with time and no late payments, it can be done.

    debt kid

  3. Welfred // February 11, 2010 at 7:13 AM  

    Having bankruptcy really hassle. But firstly if you manage briefly your credit cards it won't get you into trouble.