Credit Scores

• Bankruptcy remains on credit reports for 10 years, with the most damage to credit occurring when the bankruptcy is filed. MSN Money reports that some people emerging from bankruptcy often have relatively good credit scores in the 600s. The credit score is somewhat rehabilitated during the bankruptcy because of steady payments to lenders and the elimination of credit card and other unsecured debt. Credit scores range from 350 to 850, with scores of 720 or higher usually leading to the lowest interest rates on auto refinancing and other loans.
  
  

Chapter 7

• Chapter 7 and Chapter 13 are the most common forms of bankruptcy. Chapter 7 is the fastest and eliminates unsecured debt in about three months. Auto refinancing is generally not possible during Chapter 7 because of the speed of the process. Debtors considering refinancing during Chapter 7 are advised to wait until after the bankruptcy.
  
  

Chapter 13

• Chapter 13 does allow for auto refinancing. Chapter 13 takes three to five years to complete, with the bankruptcy court realizing some debtors will need new credit during the process. The bankruptcy trustee, who reports to the judge, likely will force the debtor to make a convincing argument for an auto refinancing, however. The trustee may agree to a refinanced loan offering lower monthly payments with the extra money used to increase payments to other creditors.
  
  

Post-Bankruptcy

• Seeking refinancing after Chapter 13 is more appropriate for most people. The issue is qualifying for a loan with better terms than the existing loan. MSN Money reports that some people build credit scores of 720 or higher within two or three years of their bankruptcy discharge. The process begins with establishing new credit by applying for secured credit cards and department store cards. Department store cards with small balances are often easy to qualify for and so are secured credit cards that require cash deposits as collateral.
  
  

Progress

• Credit scores improve after bankruptcy as the debtor makes consistent on-time payments on all debts, including credit cards and all auto loans and mortgages. Keeping balances low is also important. The debtor's overall credit rating will improve with the passage of time, allowing for standard auto refinancing after 12 to 24 months. People with bankruptcy on their credit reports should seek the advice of a local nonprofit credit counselor. The counselor can suggest banks and credit unions that may agree to a loan at reasonable rates. Referrals for credit counselors are available through charities such as the United Way.