How Filing Bankruptcy Can Improve Your Credit
Many new clients seem to assume that a bankruptcy will automatically lower their credit scores. Some even put off bankruptcy as long as possible for fear of ruining their credit. In fact, however, the very reason for bankruptcy is typically unmanageable debt. Many people are missing payments, incurring late fees and seeing interest rates rise as they struggle to bring debt under control.
You may be surprised to learn how dramatically bankruptcy can change your credit. Discharged debts can give you a fresh start similar to a “clean slate.” Once debts are discharged, many people actually see their credit scores increase quite soon.
When you contact Oliver & Legg and come into our office to discuss bankruptcy as an option for debt relief, one of the first things we will do is help you obtain your current credit score for free, as well as information about how your credit score is likely to change after you file bankruptcy.
How Will Bankruptcy Affect My Credit?
If you file bankruptcy, it will remain on your credit report for seven to 10 years. However, bankruptcy does not have the stigma it had years ago. Some creditors will actually see you as an improved risk because you will be debt free (except for secured debts such as home or car payments).
How Soon Will I Be Able to Borrow Money After Filing Bankruptcy?
In most cases, you will be able to obtain credit cards and obtain car loans shortly after your debts have been discharged. However, you may pay high-interest rates at first. You may need to start out with a debit card (a credit card backed up by cash deposits).
Filing bankruptcy can actually be the first step in improving your credit. As long as you pay your bills, your credit will quickly improve. After two years, you will be able to get an FHA loan to buy a house.
Bankruptcy Can Be A First Step Toward Rebuilding Credit After A Financial Crisis
With the burden of unmanageable debts lifted, you can turn your attention to staying in the black as you work to improve your credit. Do not be surprised if you get offers for credit cards or car loans very shortly after your bankruptcy. Proceed with caution, but keep in mind that borrowing and repaying manageably can re-establish your creditworthiness for some purposes.
The real key to maintaining an upward trend, for many people, is to take advantage of the opportunity to prevent a repeat financial crisis. Many relieved debtors have maintained momentum after a bankruptcy through steps such as:
- Getting second jobs
- Reducing spending
- Using credit sparingly and paying off balances each month
Car dealers may be eager to help you obtain a car loan after a bankruptcy. They realize the fresh start that bankruptcy offers. If you plan to buy a car, using that available credit and making payments responsibly can be an effective way to bolster your credit rating after a bankruptcy.
For More Information About Bankruptcy and Your Credit
Ironic as it may seem, bankruptcy may be your best shot at restoring and rebuilding credit if you have serious debt problems. Ask for an evening or Saturday free consultation if you need to. Call 732-988-1500 local or send an email to request a consultation with a New Jersey bankruptcy lawyer to begin the dialog about bankruptcy and credit.