BANKRUPTCY AND ITS IMPACT ON CREDIT
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Bankruptcy and Its Impact on Your Credit
Bankruptcy and your Credit Score
If you are considering filing for Bankruptcy, you may be worried about how it will affect your credit. You should first check your credit score on your own to know what is at risk. You will also need to determine which Chapter of bankruptcy you will file, since it can impact your credit differently. Most filers choose between Chapter 7 and Chapter 13 Bankruptcy.
What Debt Discharge Does to Your Credit?
In a Chapter 7 bankruptcy, your debts will be discharged without repayment. A Chapter 13 bankruptcy requires you to repay at least some of your unsecured debts. For that reason, Chapter 7 bankruptcy has a greater negative impact on your credit score. However, this can be balanced out depending on how many past-due accounts are closed by discharge.
What Happens to Your Credit Score After Bankruptcy?
If you have a credit score of 700 and above, you can expect a dramatic drop in your score post-filing. However, this isn’t the case for most bankruptcy filers. If you have a medium-to-low credit score, you will see little to no change, if not a slight increase. You can rebuild your credit score after your bankruptcy through proactive measures.
Our office provides our clients with a projected score one year after filing.
Myths about Bankruptcy and your Credit Score
-Bankruptcy destroys your credit forever: Bankruptcy can actually be used as a tool to help your credit if you take the proper steps post-bankruptcy.
-Bankruptcy remains on your credit forever: A Chapter 7 Bankruptcy remains on your credit for 10 years from the date of filing. A Chapter 13 Bankruptcy remains on your credit for 7 years from the date of filing.
-You can never get a loan again after bankruptcy: You will be eligible for a home loan 2 years after bankruptcy. You will receive offers for new lines of credit once your case is discharged, and may be able to finance a new vehicle before then.
-Everyone will know about your bankruptcy: Bankruptcies are a matter of public record, but most people won’t be checking the public record for your name. Your landlord won’t be notified unless you intend to break your lease, and your employer won’t be notified unless your wages are being garnished.
How Can I Raise My Credit Score After Bankruptcy?
A safe way to increase your credit score after your bankruptcy is to open a secured credit card through your bank. This is prepaid, so you won’t risk racking up new debt that you won’t be able to discharge for years. You should also receive offers for new credit cards after discharge, but you may still have difficulties getting approved.
If you don’t own your car outright, you may want to consider surrendering your financed vehicle in your bankruptcy. Your current lender will no longer be required to credit report positive payments after your bankruptcy, but can continue reporting negatively. If you finance a new vehicle, they will have to credit report all payments despite your prior bankruptcy.
Zero Down Mesa Bankruptcy
Some law firms offer $0 down post-filing bankruptcy options. This means you will pay no money down to file, and pay your bankruptcy fees in installments after the bankruptcy. If so, you should confirm with your attorney that your payments will be credit reported. If you are interested in ourZero Down Mesa Bankruptcy give us a call at (480) 800-0033.