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Rebuilding credit after filing for bankruptcy in Arizona

Declaring bankruptcy may be the answer for an Arizona resident struggling with financial difficulties. It provides an opportunity to start afresh and often emerge more financially solid than before.

Chapter 7 and Chapter 13 bankruptcies are the two main types of bankruptcy options available to an individual. Filers who continue to collect a sizable income may prefer filing for Chapter 13 bankruptcy as they can retain possession over many assets, such as property and vehicles, allowing them the option to continue earning. Lenders collaborate with banks to create a modified repayment plan. The Chapter 13 bankruptcy process continues until debts are paid off, usually three to five years.

For people without substantial sources of income and limited assets, Chapter 7 may be the better option. Their assets are sold quickly and the filer emerges from the process fairly quickly. Chapter 7 filers can also maintain some assets, however.

Filing for bankruptcy does not mean the end of the world for debtors. They can rebuild their credit score and their financial life after a bankruptcy.

It is possible to improve your credit score even during the Chapter 13 bankruptcy process. Though filers may be unable to apply for some forms of new credit, they can deposit money to use through a secured credit card as a first step. A filer's new credit history then builds as the company reports the card's activity to credit bureaus. It may take time for the score to rise, but by careful managing expenses, the recovery will be steady.

Some Arizona residents may file for bankruptcy because of factors outside of their control, such as an unexpected injury or loss of income. Even though they filed for bankruptcy as a last resort, it can be the first step towards their new financial life.

Source: San Francisco Chronicle, "How to survive bankruptcy," Angie Mohr, May 9, 2012