One of the most prevailing myths about bankruptcy is that it somehow permanently damages your credit rating. People fear that they will never get a loan or credit card again, or will be turned down for a job or housing. Federal law specifically prohibits discrimination with respect to employment or terminating the employment of the person who files for bankruptcy. See 11 U.S.C. 525.
The lawyers of Simon Fitzgerald LLC have your best interests in mind, including your long-term financial health. We are happy to address your concerns about your credit and life after bankruptcy.
Bankruptcy And Your Credit Score
Carrying a lot of debt has a negative effect on your credit score. Skipping payments or paying bills late lowers your credit score. In other words, your credit rating may already be poor if you are considering bankruptcy. Others have great credit scores but simply can no longer keep all payments current.
When you file for bankruptcy, you are actually taking the first steps to rebuilding credit. By eliminating some debts in Chapter 7 liquidation bankruptcy, you should have the money to pay your mortgage and other debts on time, which will improve your credit over time. In a Chapter 13 bankruptcy filing, making the monthly payments to the trustee puts you on the road to good credit.
Within the first year after discharge you will probably get credit card offers again and have the opportunity for new vehicle loans. Within two years of discharge, most people who have filed bankruptcy are eligible for home loans if they would otherwise qualify.
Life After Bankruptcy
Filing for bankruptcy can be humbling, even if debt problems started with events beyond your control such as a job loss or medical crisis. Many famous people and major U.S. companies have filed for bankruptcy.
A bankruptcy can stay on your credit report for up to 10 years. Generally, Chapter 13 filings are removed after seven years. But as you get further away from bankruptcy, creditors are more interested in your current debt habits. If you stick to a budget, use credit cards responsibly and pay your bills on time, a past bankruptcy will be irrelevant long before it comes off your record.
The immediate impact of bankruptcy is the relief from creditors and the financial “wiggle room” that’s been missing. Clients often tell us their only regret is suffering so long before taking the step to file bankruptcy.
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