10 Best Credit Cards After Bankruptcy Discharge – (Rebuild Credit)

By: Sean Garrity • February 15, 2017

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While no one likes to admit defeat, sometimes our debts simply get the better of us and bankruptcy may become the only option for a better financial future. Unfortunately, your credit will see lasting negative impacts from a bankruptcy, but you can repair your credit with some hard work — and a lot of patience.

One of the first steps you should take after your bankruptcy is complete is to check all three of your credit reports. Make sure all of the accounts that were affected by the bankruptcy accurately reflect their new status, or have been properly removed.

The next step is to start rebuilding your credit. A big bankruptcy myth is that you will only be able to qualify for a secured credit card after bankruptcy, but that’s not always true in today’s credit market. Some lenders, particularly subprime lenders, will consider post-bankruptcy applicants for unsecured cards. Begin your search with our expert-rated picks.

Unsecured Cards (5) | Secured Cards (5) | Bankruptcy Basics

Top 5 Unsecured Credit Cards to Apply for After Bankruptcy

The major reason many prefer unsecured credit cards to secured cards is, really, the major difference between the two: the deposit. A secured credit card is secured by the deposit you put down, and, in most cases, that deposit will set your credit limit. An unsecured card requires no deposit but may have more stringent requirements.

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One good way to see if you may qualify for a particular card before going through a hard credit pull is to check for pre-qualification offers. Most issuers offer a pre-qualification process that usually involves a soft credit pull and won’t affect your credit score.

5 Best Secured Credit Cards for Post-Bankruptcy Bad Credit

If you don’t qualify for an unsecured credit card or prefer setting your own credit limit through a deposit, secured credit cards are a great option. Because the card is secured by your deposit, almost anyone can qualify for a secured card.

+See More Secured Credit Cards

One of the aspects of your credit score is your utilization rate, or the ratio of available credit to debt. With a secured card, your deposit can determine your credit limit, meaning you may be able to achieve a higher limit with a secured card than an unsecured credit card.

Bankruptcy Basics

Bankruptcy is a last-ditch option for those overwhelmed by debt. The actual effects of bankruptcy proceedings depend on the type of bankruptcy declared, but can include debt forgiveness or moderated repayment. For individuals, the most common types of bankruptcy are Chapter 7 and Chapter 13.

Obtaining a Bankruptcy Discharge

A bankruptcy discharge is the goal of the bankruptcy process and is the actual legal order that says you are no longer obligated to pay any discharged debts. Once discharged, creditors holding a debt may no longer attempt to collect on that debt, either by mail, phone, or in person.

Each debt being considered for discharge has a fixed time during which a complaint objecting to the discharge may be filed. If there is no litigation objecting to the discharge, debtors will generally receive a discharge automatically.

Chapter 7 vs. Chapter 13 Bankruptcy

For the most part, the difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy is a matter of scope and qualification. Under Chapter 7 bankruptcy, many of your unsecured debts can be completely wiped out, including credit card debt and medical bills. When you file for Chapter 13 bankruptcy, you’ll be required to pay back some portion of your existing debt.

Since Chapter 13 bankruptcy involves paying off your debts over time, you won’t receive a final discharge until all payments have been made under the plan, which can take between three and five years. In contrast, Chapter 7 is much faster, with complete discharge typically being reached within six months.

All that being said, not all debtors can qualify for Chapter 7. If you make too much money and/or have too much disposable income, you may not be able to file Chapter 7. Additionally, if you want to maintain ownership of any property or other collateral used for a secured debt, including real estate and automobiles, you should choose Chapter 13 bankruptcy.

Rebuilding Your Credit After Bankruptcy

Though your debts may have gotten the better of you, recovering from a bankruptcy is possible. No matter which road you take through the bankruptcy process, the key to rebuilding your credit afterward is patience. Rebuilding your credit will require you to demonstrate healthy financial habits, including the ability to maintain credit accounts — in good standing — over a period of time.

Don’t apply for a dozen credit cards hoping to boost your credit quickly — this will backfire. Stick to one or two cards, use your credit modestly, and pay off any debts in full each month. If you are diligent, you will be able to see your credit improve over the course of months and years.

Editorial Note: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

About the Author

Sean Garrity

Sean Garrity is a contributing editor at Digital Brands with over 10 years of experience researching, writing, and editing for numerous industry-specific publications. His goal is to help inform stakeholders about the latest trends and technologies in the finance industry. When he isn’t wrapped up reading about the latest solutions for consumers, you can find Sean outdoors, camping and fishing with his wife and two sons.