Can You Improve Your Credit Score Under Chapter 13 Bankruptcy?

Sometimes, debts are inevitable. In extreme cases, you may have to file for bankruptcy, a process which intends to relieve you from creditors and give you a fresh financial start.

When you decide to file for bankruptcy, you have different chapters to choose from, such as Chapter 13 bankruptcy. With this type of bankruptcy, a court will authorize a repayment term, where you must put in your best effort to repay the loan within the repayment term. The best part about this bankruptcy chapter is that your loan repayment features 0% interest.

However, the big question is, can you improve your credit score during chapter 13 bankruptcy? You can do a lot to build and reinvent your credit score, despite being under bankruptcy. Discover some tips to help you improve your credit score.

Make Payments on Time

The court expects you to make repayment within the outlined period. The good thing is that your trustee considers your financial situation to tailor a flexible payment plan for you.

However, you must go out of your way to ensure you do not miss any payment. The effort will show your commitment to clear debts, which will automatically boost your credit score. But how do you make timely payments during bankruptcy and financial challenges?

Create a Budget

Create a budget that includes your loan payment as a priority bill. You may create a weekly or monthly budget that allows you to set aside an amount for loan payments.

Note that commitment and discipline are the keys to help you stay on track. Do not let temptations sway you to spend the money you put aside for loan clearance on other things.

As you create a budget, consider your income and the amount you owe the creditor. This step will help you create a sustainable budget.

Set a Payment Reminder

Many people agree that they often forget to repay a loan, which only hits their minds days later. The thing about chapter 13 bankruptcy is that you cannot afford to miss even a single payment if you do not want to get into further trouble.

To avoid this problem, set a loan payment reminder. Even better, you can set up automatic payments to ensure your payments are always on time, even if you forget.

Keep Credit Utilization Low

Credit utilization is the amount of credit you use compared to the available credits. Try to minimize the amount of credits you spend during chapter 13 bankruptcy to help boost your score.

Talk With Your Trustee

If you cannot make payments on time for any viable reason, reach out to your trustee. The trustee may be able to modify your payment plan to a more flexible setup. The modification will reduce cases of missed payments so you can retain a positive credit score.

Minimize the Amount You Spend on Debts Monthly

The amount of your total monthly income that you spend on debts is among the most significant credit score determinants. If you spend most of your income on debts, the credit score calculator assumes you are not well financially, which negatively affects your credit score. In the same way, if you strive to lower your debt-to-income ratio, this shows financial capability and discipline, and your credit score will undoubtedly go up.

You can rebuild your credit score during chapter 13 bankruptcy. But you must be ready to work on your financial discipline to reduce your debts. Talk to our expert bankruptcy lawyers at Custer Custer & Clark LLC Attorneys at Law today for advice on other tips to change your financial situation for the better.