Does Filing Bankruptcy Ruin Your Credit

If you are wondering whether filing for bankruptcy does ruin your credit, then you should know that it does not. But you have to make sure to take some measures for restoring your credit after the case is over. 

Your bankruptcy report will be visible on your credit reports for ten years under the Fair Credit Reporting Act. For seven years, any accounts that are discharged by bankruptcy will appear on your credit reports as “Included in Bankruptcy.” Bankruptcy will immediately lower your credit score and prevent you from getting credit, at least not on favorable terms.

You might be able to get a loan or credit card quickly after filing for bankruptcy. However, the interest rate is likely to be higher. You may be able to get loan terms closer to what you would normally receive two years after filing bankruptcy. Over time, however, the negative effects of bankruptcy will diminish. Long-term, bankruptcy filings can have a minimal impact on your credit score and credit rating. Make sure to talk to a Florida bankruptcy lawyer today!

What If I Have a Bad Credit Score?

People with bad credit scores may wonder why bankruptcy could have such a negative impact on their credit. Although the pros and cons of bankruptcy should still be considered, you may want to be more concerned if your credit score has already dropped. Your bankruptcy could result in your credit score falling to the 300-400 mark. Which is a very difficult range to recover from. If your credit score falls below 300, very few creditors will speak to you until your scores reach 600 or higher. It can take a while to get back to that point. Don’t believe that because your credit score is already poor, it makes it easier to file for bankruptcy.

Can Bankruptcy Really Improve Credit Scores?

Your credit score will increase immediately after your bankruptcy, but then it will plummet within a few months. You may end up with a higher credit score in some cases than before bankruptcy depending on your particular situation. Let’s say you are behind on your payments or have collections accounts. You should file bankruptcy to have your debts forgiven and then work hard to rebuild your credit. Bankruptcy is a great way to get a fresh start. Your credit score will plummet if you continue to make late payments, default on debts, and increase your debt-to-income ratio.

For the short term, you can use debt negotiation or debt consolidation. However, they should not be used if there is a chance of a big payday. These options quickly become very difficult after six months, one year, and two years. It will soon be a bad idea to do nothing, i.e., hide your head in the sand hoping it all will go away. Paying back the debt is an option, but it’s not a viable option.

You will experience a decrease in your credit score if you make more payments than you pay. It is not as severe as filing for bankruptcy. However, filing for bankruptcy can have a devastating effect on your credit score within the first six months. You will move to the “decent” category after the second year and possibly even the “good” category in the third year. This is assuming that you are extremely responsible with your credit and pay your bills on time.

How Can I Improve My Credit Score After Bankruptcy?

It will take time to rebuild your credit and improve your credit score after bankruptcy. You could be eligible to refinance your Chapter 13 bankruptcy if you have filed for Chapter 13 bankruptcy, paid all your creditors in accordance with the court’s instructions, and have not missed a payment. Even if that is impossible, after three to five consecutive years of managing your money well and living within a tight budget, you may be eligible for a regular mortgage loan or car loan. Don’t borrow too much, or too fast. You can start a savings account by putting money in every paycheck. You are now in a better place to save money because you have paid off your debt.

Save 10% of your income to have an emergency fund. Never take out a payday loan or a car title loan. These predatory lending schemes could lead to you paying up to 400 percent interest. You should carefully examine your credit report and credit score to identify any errors or incorrect information. 

We Are Here to Help

If you are considering filing for Chapter 7 bankruptcy, it is highly recommended that you do not take this plunge without first consulting with a bankruptcy attorney. That way, you will know what to expect, what to prepare for, and how to ensure the process goes smoothly. Talking to experienced bankruptcy lawyers in Tallahassee FL.

If you still think about whether filing bankruptcy does ruin your credit, then be sure to seek out advice from only credible sources. Contact our bankruptcy lawyers in Tallahassee at Bruner Wright P.A. today!

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