How to Recover From Chapter 13

If you're in the midst of a Chapter 13 bankruptcy, your credit has taken a hit. But it doesn't have to be a permanent one. Even though a bankruptcy stays on your credit report for 10 years, it's often possible to get credit shortly after your obligations are discharged. Used wisely, this first step can serve as the cornerstone of your recovery from Chapter 13. After that, it's just a matter of time and sound financial management before you're back on your feet with an improving credit score and access to more credit at better interest rates. After two years of on-time payments and a qualifying credit score, you can even qualify for an FHA-backed mortgage loan.

Figure out how you got here. The more honestly you identify your mistakes, the less likely you are to repeat them.

Pay your bills on time every month. Arrange auto-payments if you're not sure you'll be able to stay on top of these items on your own.

Establish a household budget and stick to it. Make tracking your expenses a habit.

Plan your post-bankruptcy financial goals and the steps you need to take in order to meet them. Write them down. You'll have much better chances of success with a written plan than an unwritten one.

Order your credit report. If there are errors, report them in writing to the credit bureaus and request corrections.

Apply for a credit card. Shop for a secured card that reports to credit bureaus; otherwise the card won't help you reestablish good credit. Secured cards require that you make a cash deposit as security for using your card. The credit limit is usually the same as the amount of the deposit.

Use your card often and pay off the balance each month to avoid accumulating debt all over again. Keep your balance below 30 percent of your limit at all times.

After six months, apply for an unsecured credit card. Use it regularly, keep the balance below 30 percent of your limit and pay off the full amount owed each month.

Apply for a revolving loan, such as a car loan, appliance or student loan.


  • Seek credit counseling if you need help identifying how you wound up in bankruptcy or if you want guidance in creating and using a budget.


  • Heed the advice of Henry Sommer, president of the National Association of Consumer Bankruptcy Attorneys, who warns against borrowing from predatory lenders. Beware of payday loans and rent-to-own schemes for would-be homeowners.