How to Build Credit After Chapter 13 Bankruptcy?
Credit Education Bankruptcy Chapter 13 Bankruptcy

How to Build Credit After Chapter 13 Bankruptcy?

Tanmay Punyarthi

Table of Contents

There may be financial upheaval during the bankruptcy procedure. But filing, you may start working to fix your finances and rebuild your credit. You can file for bankruptcy under a number of different "chapters". In exchange for having the majority of their debts forgiven, Chapter 13 bankruptcy enables debtors to make manageable payments over a predetermined time frame. First step to rebuilding your credit score is being aware of what exactly is chapter 13, and its potential to affect your credit along with how to establish credit after chapter 13. Let’s explore all the details for building credit after chapter 13.

What Is Chapter 13 Bankruptcy?

The terms "wage earner's bankruptcy" and "repayment plan bankruptcy" are frequently used to describe Chapter 13 bankruptcy. Individuals who are enduring financial troubles yet are earning enough money to pay back some debt often use this sort of bankruptcy.

Most debts are not forgiven by Chapter 13 bankruptcy. However, it does grant borrowers a respite from collection activities and can halt attempts by creditors to seize your house, vehicle, or other property. Chapter 13 bankruptcy, like other types of bankruptcy, is named after the provision of the U.S. Bankruptcy Code that outlines it.

How Does Chapter 13 Bankruptcy Impact Your Credit Score?

Your credit score is expected to drop between 160 and 240 points if you file for Chapter 13 (reorganise debts; establish a payment plan).

Contrary to popular belief, credit scores that were lower before filing for bankruptcy tend to lose points less quickly than those that were much higher. According to an eight-year-old FICO research, a person with a 680 credit score would lose 150 points and a 780 would lose 240 points. Both people are dropped into the same undesirable 530–540 neighborhood.

How Difficult it is to Build Credit After Chapter 13 Bankruptcy?

After a Chapter 13 bankruptcy, getting new credit is typically more difficult. It can be more difficult to obtain acceptance, there might be higher interest rates and costs. However, it's critical to establish new credit following bankruptcy in order to prove that you're a trustworthy borrower.

Can You Build Credit while in Chapter 13 Bankruptcy?

Yes. During a chapter 13 bankruptcy, loans might be issued for credit cards, vehicles, or even a home mortgage. The mortgage loan is the most challenging of the loans, although it is feasible once the bankruptcy case has been ongoing for some time.

Best Ways To Build Credit After Chapter 13 Bankruptcy

Here is the some of the best way to rebuild credit after chapter 13:

  • Keep up payments with non-bankruptcy accounts
  • Apply for new credit
  • Avoid job hopping
  • Have a Cosigner
  • Pay Timely with New Credit

Let’s learn best ways of building credit after chapter 13 bankruptcy in detail.

  • Keep Up Payments With Non-Bankruptcy Accounts

Find out accounts which weren't closed after filing for bankruptcy. Although bankruptcy erases a large portion of your debt except college loans or alimony payments.

Making all of your payments on time and in full will help you rebuild your credit after bankruptcy. Maintaining a payment history is essential to establishing good credit. Additionally, it is ideal if your credit usage ratio is modest.

  • Apply For New Credit

After a Chapter 13 bankruptcy, getting new credit is the best way to build credit after chapter 13. It can be more difficult to be accepted, there might be higher interest rates and costs.

However, it's critical to establish new credit following bankruptcy in order to prove that you're a trustworthy borrower. As we've already discussed, establishing a track record of timely payments might give you the boost your credit needs. Make that the lender reports to Experian, TransUnion, and Equifax when opening any new line of credit.

Making a refundable security deposit is necessary to apply for a secured credit card, which must subsequently be used to secure loans. Even though these cards typically have high interest rates, if they are reported to all three credit agencies, they are an excellent way to demonstrate responsible credit conduct until you are more qualified for a standard card with more favorable terms.

After making frequent on-time payments, some secured cards even let you "graduate" to an unsecured card. When your credit improves, you won't have to apply for a new, unsecured card, which is a plus.

  • Avoid Job Hopping

Although it doesn't directly impact credit scores, job hopping can have an impact on lenders. They want to be sure you have a steady source of income and can pay back any loans they extend to you.

Lenders take your income, employment history over the last 24 months, credit score, and other criteria into account when evaluating your application for new credit or a loan. The lender will be more confident in your capacity to repay the loan even after bankruptcy if you have a steady job.

  • Have A Cosigner

After bankruptcy, being a cosigner on a loan or rental agreement can increase your chances of getting approved. In the event that you are unable to make payments, a cosigner serves as your legal financial backer. Even with a cosigner, you can still be given credit in your own name. You can still raise your credit score by making payments on these credit accounts.

Additionally, you have the option of adding yourself as a credit card approved user. Ask a friend or relative to add you to their credit card account. As long as the credit card issuer sends payments to the credit bureaus, they should appear on both your and their credit reports.

  • Pay Timely With New Credit

Your credit score is primarily influenced by your payment history. It's essential to make prompt payments after you obtain fresh credit for building credit after chapter 13. In order to keep up with your payments, you can:

  • Activating autopay
  • repeatedly paying down your credit card each month
  • Organizing reminders for payments
  • Organizing your personal funds to enable you to make the entire monthly payment

How Long Will It Take To Build Credit After Chapter 13 Bankruptcy?

For seven years Chapter 13 bankruptcy will remain on a consumer's credit report. However, once your Chapter 13 bankruptcy has been discharged, it typically takes between 12 and 18 months for your credit score to start rising. After 18 months, many borrowers can refinance their modified loan.

Although bankruptcy gives you a second opportunity, it does not remove a negative credit history. Avoid wasting it. Your credit score will start to reflect your personal financial maturity if you can show that you've learnt a valuable lesson. Keep in mind that you have the right to try again if you fail. You can recover from bankruptcy and find success again with one of the best secured card “Zolve Azpire Credit builder card”. It doesn't have to be the end for you, but new beginnings of excellent credit score.


  1. How to build credit after chapter 13 bankruptcy?

Ans. The easiest way of building credit after chapter 13 is to get the best secured credit card. Always go for cards with minimum or no minimum deposits, no annual interest and make sure credit companies report to credit bureaus. One such wiser option is to Zolve Azpire Credit Builder Card.

2. For how long does chapter 13 bankruptcy stay on credit?

Ans. Your credit report will include a Chapter 13 filing for seven years. But the time begins when you submit the petition, not when the repayment plan is over. The best way to build credit after filing chapter 13 is to get a secured credit card.

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

Ans. 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 a Chapter 13 after 18 months of regular Chapter 13 payments, especially if you have any equity in a home.