Can I Rebuild My Credit after Bankruptcy? Yes You Can!

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Bad credit records such as delinquencies, too much outstanding credit, slow pays, etc are all negative marks that will remain on your credit record for up to 10 years. In most cases, although the creditor may not be actively pursuing your debt, the debt remains valid and open to collection through wage garnishment or bank account seizure. Bankruptcy solves this problem because it eliminates your debt. After bankruptcy, your financial situation will be far better as you will no longer be shuffling funds in an attempt to cover all the bills. After bankruptcy, our clients are excited to create a new budget… that includes savings!

Usually within a year of filing bankruptcy, your credit record will improve substantially. You will become a better credit risk than you were prior to the bankruptcy. For many, bankruptcy is the first step to rebuild your credit, financial freedom and saving for the future.

Once you complete your case and your debts are discharged your old debt is eliminated. You will have a Fresh Start! Most creditors will see this fresh start and lack of other debt as a positive. One Caveat—creditors now want evidence that you can handle credit going forward. For this reason, after you file bankruptcy it will be extremely important that you control your use of credit.

Initially, bankruptcy will be a hit on your credit score but in the long run, the notation “discharged in bankruptcy” is much better than having your accounts reported as delinquent and open. We recommend that soon after your bankruptcy discharge you get a copy of your credit report. Review this report carefully, check to make sure that the debts you included in your bankruptcy are reported to be DISCHARGED with a ZERO balance. Dispute any accounts that have not been updated.

Depending on when you file Chapter 7 or 13, a bankruptcy will stay on your credit for 7-10 years. Despite this, you will soon have the opportunity to rebuild your credit. Some companies cater to those who have filed bankruptcy by offering secured credit cards with low credit lines and high interest rates. If you use this credit wisely and make all your payments on time you will prove that you have become a good credit risk.

What Factors Will Affect My Ability to get Credit?

Factors that are considered: Income,  Job History,  Credit Score,  Debt-to-Income Ratio.

After Bankruptcy We Encourage our Clients To:

  • Periodically monitor your credit record and dispute errors.
  • Make “on time” payments.
  • Maintain a stable job history.
  • Deliberately and thoughtfully apply for new credit.
  • Use no more than 10-30% of your available credit.

Are You Ready to Rebuild Your Credit? We Want to Help!

The lawyers of Keegan & Co. Attorneys have over 55 years combined experience helping people just like you resolve debt issues. Our attorneys have handled several thousand bankruptcy cases from the simple to the most complex. In all likelihood, we’ve seen your situation or type of problem dozens of times before. We can almost always help, even if it’s just advice on how to avoid bankruptcy.

Many are surprised to learn just how quick and painless the bankruptcy process is. You will need to provide us with certain documents and it is required that you take two short online credit counseling classes. Our attorneys will handle the rest. You and your attorney are required to appear for just one hearing. These hearings are held at our office.

Consultations are free and at Keegan & Co Attorneys and will always be with an experienced attorney, never with a paralegal or secretary. Call 513-752-3900 to schedule your personal consultation. We look forward to meeting you!

Benefits of Chapter 13 Bankruptcy

How Can a Chapter 13 Bankruptcy Benefit Me?

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Although a client may be disappointed that they are over income and are required to file a Chapter 13 bankruptcy, many times a Chapter 13 is more beneficial to you than a Chapter 7.

Chapter 13 Benefits

  1. You can file a Chapter 13 bankruptcy even if you have filed a previous Chapter 7 bankruptcy within the last eight years (which is the time limit for filing another Chapter 7).
  2. We may be able to to lower your interest rate and payment on your vehicles.
  3. You may give back one or more of your vehicles that are underwater or unaffordable.
  4. You may be able to pay the fair market value of your car and pay a portion of the loan as unsecured.
  5. You will make one affordable payment to the bankruptcy trustee who will then pay your creditors. We will run an income and expense statement for the trustee that allows you to maintain your household budget before any payments to creditors.
  6. We may pay your unsecured creditors as little as one cent on the dollar, depending upon your circumstances.
  7. All interest stops on your unsecured debts and secured debts we may be able to have the interest payment reduced.
  8. We can catch up arranges in both your house and vehicles in a Chapter 13 by court order. This is true even if your bank has filed a foreclosure against your home, and in some circumstances even if car has been repossessed, we can get it back. This is not available in a Chapter 7.
  9. Your plan payment can be deducted from one or both of your paychecks so you’re not concerned about making that payment.
  10. You may be able to discharge a second mortgage and wipe-out judgement liens against your real estate in a Chapter 13.
  11. If you own a mobile home, we may be able to reduce the secured portion down to the fair market value and treat the balance as unsecured and payable at a small percentage on the dollar.
  12. You can repay non dischargeable tax debt without interest or further penalties. Text debt can quickly spiral out of control with penalties and interest. In a Chapter 13 you can fix the amount and pay it off during your plan.
  13. If, during your Chapter 13 plan, your circumstances change, we can suspend or lower your payments to keep you on track. We can get permission for you to buy another vehicle. In other words, we expect that your circumstances will change during the course of your plan and your plan will be flexible to allow you to change it so that it will be successful.
  14. Depending upon your individual circumstances, you can convert your chapter 13 to a Chapter 7 bankruptcy later.
  15. If circumstances have changed for you, you’re always free to have us dismiss your Chapter 13 at any time.

In our experienced lawyer’s hands, Chapter 13 provides many, many tools to help our clients reach their financial goals. We have filed over 8000 bankruptcy cases during the 33 years our office has been open. Many of these issues are quite complicated. We provide a free consultation for you to discuss the benefits of both Chapter 7 and Chapter 13.

How Can Bankruptcy Help Me?

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Bankruptcy is a legal procedure brought pursuant to the Federal Bankruptcy Code. Bankruptcy protection is provided for in the United States Constitution. It is designed to give you protection from your creditors, protect your assets, and give you a fresh financial start.

Ways bankruptcy can help you:

Once you file a case the federal court issues an automatic stay against all your creditors which prohibits:

  • Auto repossessions
  • Mortgage foreclosures
  • Wage garnishments
  • Collection calls
  • Lawsuits
  • Any and all collection activity

Discharge of debts:

  • Credit card
  • Medical bills
  • Personal loans
  • Repossession balances

What are the Types of Bankruptcy?

Chapter 7 and chapter 13 are the two types of cases. Chapter 7 will wipe out all of your unsecured debts credit cards, medical bills, utilities, etc. in most situations, you will keep your house and vehicle in Chapter 7, as long as you are reasonably current on payments.

Chapter 13 is a repayment plan if you don’t qualify for Chapter 7 based upon your income and/or assets. You must have a regular source of income. The Chapter 13 will stop a foreclosure on your home or repossession of your vehicles. It is designed to allow you to catch up delinquent mortgage payments or vehicle payments if you’re behind.

In a Chapter 13 case you will pay your unsecured creditors somewhere between 1% and 100% of the debt owed depending upon your individual circumstances. The plan will last from three to five years.

What debts will bankruptcy not erase?

  • Alimony and child support
  • Most student loans – however there is a hardship exemption in some situations
  • Certain tax debt – this is complicated, but we will analyze your situation to determine whether any of your tax debt can be discharged.
  • Certain fines and penalties imposed by a court or government agency.

What happens after bankruptcy?

At the conclusion of your case the court will issue a discharge order officially wiping out the debts listed. In almost all situations, your credit score will immediately improve after filing bankruptcy since you’re now debt free.

Are You Really A High-Income Debtor?

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High-Income Debtor

Many people with relatively high income assume they cannot file for Chapter 7 bankruptcy.  Usually this assumption is incorrect.  It is not unusual for a high-income debtor to file  Chapter 7.  In reality, high-income Chapter 7 bankruptcies are filed everyday.

What constitutes as high income depends on many factors, such as where you live, your living expenses, the size of your family, etc. For example: a salary of $80,000.00 for a family in rural Ohio goes a lot further than the same earnings in the city center of Columbus or Cincinnati.  With that being said,  a “high-income debtor” is a debtor with earnings above the state median income for the debtor’s family size.

The Ohio state median income per family size (determined by census figures) as of  2025 is as follows:

Individual Family of 2 Family of 3 Family of 4
$59,181 $74,739 $91,160 $108,950

*For each additional family member over four, add $9,900.

Why is the State Median Important?

Whether your income is above or below the Ohio state median income determines if you will be able to discharge all or most of your debts in Chapter 7, or be required to pay back at least a portion of your debt under Chapter 13.  If your average gross earning for the six months before filing for bankruptcy is at or below the state median for your family size, you may file under Chapter 7 (assuming you meet other requirements).

On the other hand, if your average gross earnings for the six months before filing is over the median, your attorney will perform a  “means test” to determine if you qualify for Chapter 7.  This means test considers your income minus certain allowable expenses.  Frequently, the results allow a debtor with substantial earnings but high expenses to file Chapter 7.

Are You Really a High-Income Debtor?

Before jumping to meet the means test, debtors need to determine if they are actually high-income debtors for the purposes of the test.  We often have clients with seemingly high earnings who are surprised that they fall below the state median. Many of these clients have not considered the size of their families. One of the most important factors in determining whether or not you are a high-income debtor is family size.

Even if the debtor is above the state median, it is often by much less than the debtor presumed.  The closer your overall earnings are to the state median, the easier it is to pass the means test.

What Type of Income is Counted in the Means Test?

If you appear to be over the median, you may still be able to avoid the means test, depending on what type of earnings you have.  Not all sources of money count as income for calculating gross earnings.  For example, under the Bankruptcy Code certain income, primarily social security, is excluded from your gross income for the purposes of the means test.  This exclusion will often bring a debtor’s gross earnings below the state median, thus avoiding the means test.  In addition, because the bankruptcy code focuses on “regular income”, some irregular earnings may not count as “gross income”.

Can I Pass the Test for Chapter 7?

Finally, even if you must take the means test, it is still quite possible that you will qualify for Chapter 7.  Very often, high-income debtors have high allowable expenses, including mortgage payments, vehicle payments, etc., that will offset their earnings.  Although the means test is complex and must be handled carefully, it is not at all unusual for high-income debtors to pass the test. However, failing to list income of any kind can lead to unpleasant consequences.  Attention to detail is the name of the game.

What about Chapter 13 for High-Income Debtors?

We have spent most of this blog discussing the initial qualification for Chapter 7.  However, it is important to note that even if you pass or avoid the means test, you do not automatically get to file  Chapter 7.  You must meet all other requirements, including a showing that after expenses, you have no significant disposable income to pay your creditors.  In addition, there may be a reason for choosing Chapter 13, such as saving a house from foreclosure or a car from repossession.  In some cases, a non-bankruptcy solution such as debt negotiation may be available.