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How does bankruptcy affect my credit?
Most people probably realize that bankruptcy
will have a negative affect on their credit. It is very difficult
to give a general explanation on how bankruptcy will affect
credit because it is different for every situation.
When a credit score is calculated, numerous
things are taken into consideration, so keep in mind your
situation will make how your credit is affected possibly different
from your neighbor.
The most important decision you will make
when deciding to file bankruptcy is if it is really necessary.
Many people file when they really don't have to, and some
attorneys jump the gun on giving advice to file. So take
a clear look at all your finances and the situation you are
in before jumping into bankruptcy headfirst.
Bankruptcy should be one of the last alternatives
you choose. If possible, find an objective party outside of
the situation who can help guide you. Emotions running high
make it difficult to make a good decision in the middle of
hard times.
So what happens if you do choose to file bankruptcy?
The most long-term affect is that it will show up on your
credit report anywhere from 7 to 10 years. Now this does not
mean that you will not be able to get credit or purchase things
on credit. It just means that you will probably be paying
a higher interest rate for anything you do purchase in the
future.
But the fact of the matter is that if you have
been having trouble making payments for some time, then your
credit may already be damaged to such a degree that bankruptcy
may not be as big a hit to your credit as you would think.
If your credit is already in terrible shape,
the only thing that might make it worse is that the bankruptcy
shows up for such a long time. Different creditors will see
bankruptcy differently, and it depends who you are trying
to borrow from as to whether or not you will be able to obtain
credit from them.
Since there are legal requirements limiting
how often you can file bankruptcy, some creditors will not
be as hesitant to lend you money as you might think because
they know that you will not be able to file again for some
time and that you will hopefully make your payments. Another
downside is that you may not be able to get as much credit.
But there are lenders everywhere who will lend you something,
even if it is a small amount at high interest rates.
Some people try and spend a lot of money on
credit because they know they will be filing bankruptcy and
will have the debt "wiped out". Do not do this!
It is considered fraud and can get you into trouble. And you
may not be able to have all of your debt wiped out.
Only individuals who are eligible can file
Chapter 7 bankruptcy, which is the type to wipe out debt.
Under Chapter 13 bankruptcy, which is what most people will
be eligible for, debt is not wiped out but is consolidated
and payments have to be made to pay it off. So consider the
fact that there is more to a bankruptcy than just wiping out
debt. And some debts cannot be wiped out at all, such as child
support and some taxes.
On the other side of the fence are people who
are afraid they might lose everything in a bankruptcy. You
will not lose everything as bankruptcy laws are really there
to protect the consumer, but some of your assets may be sold.
Filing a bankruptcy may be better than having the repo man
show up at your door.
A bankruptcy does look bad on your credit report
and may make it more difficult to apply for loans or get credit
cards you want, but there is still hope. There are plenty
of high-risk lenders out there willing to offer credit to
most anyone. The interest rates will be high, but at least
it is available.
Take out a little credit and make regular payments,
being sure not to be late. After a few years of paying regularly
and on time, your credit will begin improve and more lenders
will be willing to lend to you at lower interest rates. It
only takes some planning and commitment to get back on track.
If you would like more information on how to
repair your credit after bankruptcy visit http://www.creditsparkle.com
Back to Bankruptcy
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