Rebuilding Your Credit After Bankruptcy

Credit scores have become an important part of financial life, and many people struggling with unmanageable bills put off pursuing debt relief because they worry that filing for bankruptcy will make future borrowing impossible. This is one of the most pervasive myths surrounding bankruptcy. The experienced attorneys at Ast & Schmidt, P.C., in Morristown can explain to you that a Chapter 7 or Chapter 13 petition can begin to improve your credit.

How Bankruptcy Affects Credit Scores

Individuals generally do not pursue their debt relief options until their financial situations are dire, which means that their credit scores are likely already damaged and may not be reduced further by a bankruptcy.

The weight attached to bankruptcies by credit-reporting agencies like TransUnion, Experian and Equifax generally falls about two years after Chapter 7 or Chapter 13 cases have been discharged. Your scores may even increase when large amounts of debt have been eliminated and you have reduced your monthly expenditures.

Securing Credit After Bankruptcy

While banks may not extend credit to you while your Chapter 7 bankruptcy petition is pending, many are happy to extend credit as soon as your case is finalized, and your debts are discharged. If you pursue a Chapter 13 bankruptcy, you may even receive permission from the court to take out a car loan or mortgage while you are still making payments under your repayment plan.

Do you need a home loan? Federal Housing Authority rules allow real estate loans to be extended after Chapter 13 payments have been made for at least one year. If you file for Chapter 7 bankruptcy, you may qualify for an FHA loan two years after your case is dismissed.

Make Decisions Based On Facts, Not Myths

The banks are the winners when individuals put off pursuing debt relief due to concerns over plummeting credit scores, but these fears are often unfounded. Bankruptcy allows debtors to close the door on anxiety and stress, and provides them with a fresh start and the opportunity to rebuild their credit profiles.

If you wish to get to the bottom of the misconceptions surrounding bankruptcy, please contact our law firm online or schedule a free initial consultation with one of our lawyers in New Jersey by calling 973-984-1300.

Ast & Schmidt, P.C., is a debt relief agency. We help individuals file for bankruptcy relief under the Bankruptcy Code. The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.