Eligibility for Credit After a Bankruptcy Filing

Many debtors in South Florida who are experiencing significant financial struggle are considering the possibility of bankruptcy, but they have concerns about how a bankruptcy filing will affect their eligibility for credit after a bankruptcy case. There are many misconceptions out there about consumer bankruptcy, including how bankruptcy affects a person’s credit. The myth — and indeed, it is a myth that is not rooted in fact — often circulates that a person who files for bankruptcy will never be eligible for credit again, will never be able to buy a home and qualify for a mortgage, and other false ideas.

While bankruptcy does affect a person’s credit, it is easier than you might think to rebuild your credit and to become eligible for lines of credit or loans with creditors again once your bankruptcy case is finalized. After all, personal bankruptcy is supposed to provide a fresh start for debtors, and it does provide that fresh start. Consider the following information from our West Palm Beach bankruptcy attorneys.

Bankruptcy Does Affect Your Credit

You should know that bankruptcy does affect your credit. According to Bankrate, the average drop in a person’s credit score after a bankruptcy filing is approximately 200 points, but circumstances differ from debtor to debtor. If you file for Chapter 13 bankruptcy, it will remain on your credit report for 7 years, while a Chapter 7 bankruptcy filing will remain on your credit report for 10 years. However, during that time, you can take steps to start rebuilding and significantly improving your credit (which we will explain in more detail below).

High-Interest Debt Also Affects Your Credit Score

While you might be thinking that you do not want bankruptcy to have that kind of an impact on your credit score, it is important to remember that accruing debt that goes unpaid, and that may eventually be turned over to collections and debt collectors, will also significantly impact your credit. If you do not have a way of addressing that debt, your credit score will continue to drop. If you file for bankruptcy, you will take the initial credit hit from which you can begin to rebuild.

Steps to Rebuild Your Credit After Bankruptcy

As soon as your bankruptcy case has been finalized and you have received a discharge, you can immediately begin rebuilding your credit. Some common options include but are not limited to:

• Opening a secured credit card;
• Making regular payments to existing creditors;
• Seeking new lines of credit, even if you have to pay higher interest rates at first, and making timely payments; and
• Being added as an authorized user on another party’s credit card account in good standing.

Within just a couple of years, depending on your circumstances, you could even be eligible for a mortgage. The timeline can be even shorter if you are eligible for certain types of mortgages, such as FHA or VA loans.

Contact a West Palm Beach Bankruptcy Attorney Today 

Are you considering bankruptcy but want to learn more about the impacts of a bankruptcy filing? One of the experienced West Palm Beach bankruptcy lawyers at Kelley, Kaplan & Eller can speak with you today. Contact us for more information.

Sources:

bankrate.com/personal-finance/debt/bankruptcy-timeline-rebuilding-credit/

equifax.com/personal/education/personal-finance/articles/-/learn/rebuilding-credit-after-bankruptcy/