How to Apply for Secured Credit Cards After Chapter 13 Bankruptcy

How to Apply for Secured Credit Cards After Chapter 13 Bankruptcy

Moumita Basu

Table of Contents

You can file for bankruptcy under a number of different "chapters". In the case of chapter 13, the majority of their debts are forgiven and Chapter 13 bankruptcy enables debtors to make manageable payments over a predetermined time frame. The normal length of a Chapter 13 repayment plan is three to five years. What you can do to rebuild your credit during that time may be on your mind if you have already filed for Chapter 13 bankruptcy or are considering it shortly. Let’s explore your options of rebuilding credit in easy ways.

What Is Chapter 13 Bankruptcy?

A bankruptcy case known as Chapter 13 involves debtors reorganizing their finances under the court's oversight and consent. Individuals and married couples may apply for Chapter 13 bankruptcy, even if they are self-employed or running an unincorporated business.

Debtors must submit and carry out a plan to pay off outstanding creditors within three to five years as part of a Chapter 13 reorganization, also known as a wage earner's plan. Most of the time, the repayment plan must give creditors a sizable payback—at least as much as they would receive under other types of bankruptcy—and, if necessary, it must employ the whole debtor's disposable income for repayment.

How Does Chapter 13 Bankruptcy Impact Your Credit Score?

Since the information in your credit reports forms the basis of your credit score, bankruptcy will have an effect on it until it is deleted. If you have good credit when you file for bankruptcy then your credit score could fall by as much as 200 points. However, if you file Chapter 13, your credit score may only drop by 100 points or fewer if you have bad credit.

For seven years Chapter 13 bankruptcy remains on a consumer's credit report. However, once your Chapter 13 bankruptcy is dismissed, it typically takes between 12 and 18 months for your credit score to start rising.

Can You Get A Credit Card After Filing Chapter 13?

Although it's difficult to get a new credit line once the bankruptcy is marked on your credit, there are options for you to rebuild your credit. The effect that bankruptcy has on a credit score lessens over time, in part because the consumer's debt-to-income (DTI) ratio, which measures how much you owe in comparison to the amount of credit you have access to, immediately lowers. As a result, one to two years following discharge, you might start to notice improvements. The best option to start your credit is getting a secured credit card while in chapter 13.

When Can You Get A Secured Credit Card In Chapter 13?

Many think that bankruptcy can appear on their credit reports for up to 10 years,. You should be aware that Chapter 7 bankruptcy cases are the only ones to which this 10-year restriction applies. When you file for bankruptcy under Chapter 13, it only appears on your credit report for a maximum of seven years.

For instance, if you have a five-year repayment plan, the bankruptcy will only last two years after you have finished the plan before being removed from your credit report. So, once your bankruptcy is discharged you can apply for a secured credit card.

What Is A Secured Card?

Getting a secured credit card while in chapter 13 is a smart idea. To be approved for a secured credit card, you don't need strong credit. Instead, you can qualify by placing a deposit that the creditor may keep in the event that you cease paying your debt.

How Does Secured Card Help In Rebuilding Credit After Chapter 13 Bankruptcy?

As secured credit cards need a cash security deposit, equal to the credit limit, they are more accessible than unsecured credit cards. Your creditworthiness can be restored if you make your payments on time. The credit card company may eventually raise your credit limit or provide you a standard, unsecured credit card. Make sure the card issuer reports your account details to each of the three major credit bureaus—Experian, TransUnion, and Equifax—which will give you a greater chance to raise all of your credit scores.

A secured card's credit limit increases with the size of the deposit made. You can raise your credit scores and enhance your credit usage ratio by having more available credit that you aren't using.

Rates and costs: When compared to unsecured cards, fees and interest rates may be considerable. APR, annual charges, maintenance fees, and any other fees should be carefully considered in order to get the best secured card and reduce your expenses.

How To Apply For Secured Credit Card After Bankruptcy?

When requesting credit cards, exercise extreme caution. Every time you apply for a new credit card, the issuing company will run a hard draw on your credit record. Your credit score will normally be lowered by a few points as a result. Multiple hard pulls will negatively affect your credit score, which is already bad, so you don't want them on your record. Here is simple steps to apply for secured credit cards:

  • Choose Right Card: Only apply for credit cards where your chances of approval are favorable. Prior to submitting an application for another card, wait to hear about your existing application. Ask your provider why you were rejected if you were. Your credit score might need to be raised first.
  • Submit Your Application: Once, you have picked best secured card for you, apply for the card by submitting all required documents. After verifying your documents you will be approved to get a secured credit card after chapter 13 bankruptcy.

Note: Read the fine print before submitting a credit card application to be sure the credit card company has no bankruptcy-related restrictions. Zolve Azpire Credit builder card is one of the best and easy secured cards to get after chapter 13 bankruptcy as it comes with no subscription fees, no interest charges, no SSN required to apply, up to 15% cashback, no credit checks to apply and most importantly no minimum balance.

When To Apply For Getting A Credit Card After Chapter 13?

After filing for bankruptcy, the length of time it takes to apply for a credit card varies on when the bankruptcy is discharged or finished. Before that time, you won't be able to apply for a credit card.

After filing for bankruptcy, the length of time it takes to apply for a credit card varies on when the bankruptcy is discharged or finished. Before that time, you won't be able to apply for a credit card.

In bankruptcy under Chapter 13, it may take up to five years or however long your repayment plan is for the debt to be paid off before it is discharged.

Although establishing excellent credit takes time, you can speed up the process by using an effective yet easy-to-use Zolve Azpire Credit Builder Card. After filing for bankruptcy, it could seem like the best course of action to stay away from credit cards and loans. Instead of vowing to never use credit again, focus on getting a credit card after chapter 13 and use it effectively by keeping a close eye on your credit report to establish a good credit history.

Frequently Asked Questions

Can I get a credit card after chapter 13 bankruptcy?

Absolutely, you can get a credit card after chapter 13 bankruptcy. Although, it is hard to get a new credit line after bankruptcy, but you can apply for secured credit cards.

How to get a credit card after chapter 13?

Once your chapter 13 bankruptcy is discharged you can get a secured credit card by applying with the required documents and start rebuilding your credit.

How can I stop my credit report from receiving a hard inquiry?

Some secured credit cards don't perform a hard inquiry on your credit, preventing the initial decline in your score.

After a Chapter 13 bankruptcy, how long does it take to rebuild credit?

The debt-to-income ratio will generally decrease for Chapter 13 petitioners, but it won't happen as quickly. Chapter 13 debtors should be better able to manage their money after three to five years of adhering to a rigorous budget. Debtors can frequently refinance out of Chapter 13 after 18 months of regular Chapter 13 payments, especially if you have any equity in a home.