How Does Filing for Bankruptcy Impact Your Credit Report?

How Does Filing for Bankruptcy Impact Your Credit Report?

How Bankruptcy Can Help Improve Your Credit Score In Arizona

One of the things that people are most worried about when considering filing for bankruptcy is how it will impact their credit. They could be struggling to pay their bills, but at least they know that they have credit. They worry that if they file for bankruptcy, they won’t be able to get approved for any new credit, which could impact their ability to buy a house, buy a car, or just have a credit card to cover unexpected expenses.

The truth is that filing for bankruptcy is not the nuclear option that many people think it is. In fact, bankruptcy can actually help your credit, as well as offering you many other benefits, including relieving you of the burden of intense debt.

How Does Filing for Bankruptcy Impact Your Credit Report?

How Bankruptcy Can Help Your Credit

You don’t file for bankruptcy because you have a bit of a high balance on a credit card. You look for bankruptcy protection because you are struggling with overwhelming debt that you are unable to pay. You have gotten to the point that your balances are getting higher and higher, you can’t even afford to make the minimum payments, and you are getting calls every day from your creditors.

When you’re in this kind of debt, your credit score is already trashed. You have high balances, lots of late payments, and probably a delinquency or two. Every month that this situation continues, your credit score gets worse. When you file for bankruptcy, you reset the clock. Chapter 7 bankruptcy can give you a “clean slate,” discharging those debts completely and putting your balance at zero. Your credit can immediately start rebuilding. Chapter 13 bankruptcy puts you on a three- to five-year repayment plan that can help you make up those lost payments, slowly restoring your credit. Filing for bankruptcy can be a net positive for your credit in most cases.

Buying a Home or Car After Bankruptcy

Many people worry that they won’t be able to buy a home if they file for bankruptcy – or that they won’t be able to buy a home for another 10 years. While it is true that bankruptcy can stay on your credit report for 10 years, that does not mean that you won’t be able to buy a home in all that time.

You will need to take steps to restore your credit, or at least to stay in good financial standing after your bankruptcy is discharged. Then you will need to explore different loan programs. Some programs, like the FHA or VA programs, will approve you for a loan within two years of your bankruptcy or less. Just talk to a mortgage broker about what programs are available based on your history. You can still find good loan programs with low rates even with a bankruptcy on your record.

Rebuilding Your Credit After Bankruptcy

You can quickly rebuild your credit after your bankruptcy is discharged. The first thing you need to do is create a budget and stick to it. Spending only what you can afford each month will go a long way toward strengthening your finances and preventing you from getting into trouble with credit again. It will also help you to have savings in case an emergency arises so you don’t have to use credit.

You can boost your credit a bit by taking out a small line of credit, such as with a store credit card or a gas credit card. Use it sparingly, and pay it on time each month. You’ll notice your score being boosted steadily, and you’ll soon be back in a healthy range.

Do not let myths about bankruptcy keep you from getting the debt relief you need. Bankruptcy will not destroy your credit like many people fear. It will be a negative on your credit history, but overall, it will have positive effects on your history and your score. Just stay focused after your discharge, and you’ll soon have a healthy score that will allow you to get whatever credit you need. Plus, you’ll have the financial freedom you didn’t have before when you were overwhelmed with debt that you couldn’t afford.

Call Gilbert Bankruptcy Lawyers today to learn more about how bankruptcy might help you. We represent clients seeking protection through both Chapter 7 bankruptcy and Chapter 13 bankruptcy. Our attorneys will review your finances and help you understand which option would give you the most benefits. Our goal is to get you the maximum debt relief possible so that you can get back on firm, financial footing. Call us in Gilbert today to schedule a consultation with a bankruptcy attorney.


Gilbert Bankruptcy Lawyers
Office: 480-448-9800