Bankruptcy 101

Starting from scratch, immediately after finishing filing for chapter 7 bankruptcy, you have at least two years before you'll be ready to buy a home, but during that time you can work on building credit for a mortgage after bankruptcy so that you'll be able to get the best deal possible.

The first thing you'll want to do is start saving money! This is something you'll need to be doing over the whole course, but is really something you should do as a practice always, anyhow.

About a month after filing you absolutely need to check your credit report over for errors. It's very common for companies to fail to mark your accounts as "included in bankruptcy" and leave them marked as open, or overdue. This will really hurt you in the long run so it's important to call them and get them to change it, you may need to keep calling to make sure this gets done. A lot of people let companies intimidate them and skip this part, but it really is vital to all of your plans building credit for a mortgage after bankruptcy.

Your history is made up of two types of payments, installment (loans) and revolving (credit cards). Right off the bat you won't have much luck finding an unsecured card, and that's fine. At your bank they typically offer secured cards. Basically, you deposit a few hundred dollars into a savings account, which will work as collateral on the card. After a year to eighteen months of on time payments you will have the option to move up to an unsecured card. This will help you build a good history of on time payments.

After doing this you'll want to consider getting a small secured loan, also making sure to make all of your payments on time. I suggest doing this six months to a year after you've finished filing. Your interest rate will be very high, but this will pay off in much lower rates later, after you've improved your finances.

The most important part of this plan is making sure all of your payments are in on time, and just exercising your finances over the next few years, but doing it lightly and keeping it under control. As long as you keep this in mind building credit for a mortgage after bankruptcy should be fairly easy.