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Some Bills Won't Help Re-Establish Your Credit

October 2, 2012

If you've made the decision to file for Chapter 7 bankruptcy, you know the outlook is better on the other side. brownwallet2.jpg

You also understand that your top priority once your debts are discharged will be rebuilding your credit.

Re-establishing credit and paying all your bills on time is a big part of that, but what Costa Mesa Chapter 7 Bankruptcy Lawyer Vincent Howard of HOWARD LAW also wants you to understand is that not every bill is going to help you equally.

In fact, there are many different accounts that are not going to help you at all in terms of boosting your credit, but they will knock your score down a few notches if you don't keep up.

That's not to say you don't need them. In fact, many of them are necessary. And this is the point: Many people are petrified of getting a credit card after filing for bankruptcy. They worry about the high interest rates or strict terms. But the fact is, it's necessary because these other bills aren't going to do much to bolster your credit.

Medical bills. This is one of the main reasons people end up buried in debt in the first place, so it's important to stay on top of these if at all possible. Unfortunately, doing so isn't going to help your credit. If you don't pay, though, the billing office is likely to ship the delinquent account to a collection agency. At that point, it gets reported to the credit bureaus. There may be a few places where the billing office will ship it over to collections with instructions not to report the negative mark to the credit bureaus, but that's rare.

Rent. Most people are compelled to pay their rent on time because they don't want to be without a home. It's even more important after you've filed for bankruptcy because you may already have a difficult time being approved for a place. Failure to pay this will not only result in a negative mark on your credit, landlords are notorious for filing suit in small claims court for unpaid balances. This could make it even tougher to find another place to rent.

Utility bills. These are very similar to medical bills in that your account will be transferred to collections if you don't pay, but it's not going to help your credit score if you do.

Cell phone bills. The same goes for your cell phone bill. This is one that you may want to think about reining in for the time being, as it won't help you, and you may have difficulty keeping up with a premium plan as it is.

Other similar accounts include your old gym membership, DVD clubs like Netflix and magazine or newspaper subscriptions.

Again, some of these are necessary. Not all of them are. In the wake of a bankruptcy, you need to strategically decide which are necessary, which are helpful - and which you can do without.

Costa Mesa Bankruptcy Attorney Vincent Howard at HOWARD LAW can help. You can reach us toll-free at 1-800-872-5925 or send us a message online.

Additional Resources:
Which Bills Help you Rebuild Your Credit? Sept. 18, 2012, By Justin Harelik, Fox Business

More Blog Entries:
Multiple Bankruptcy Filings Not Uncommon, Sept. 7, 2012, Costa Mesa Bankruptcy Lawyer Blog