Is Filing for Bankruptcy Worth the Harm to Your Credit Score?
If filing for bankruptcy is so easy, why don’t more people do it? A lot of people do file for bankruptcy, some of them more than once, but you should not take the decision to go to bankruptcy court lightly. You can’t just buy anything you want on credit without giving any thought as to how you will eventually pay for it and then wipe your debts away every seven years and start again. Filing for bankruptcy protection is not a financial seven-year itch. It will make some of your debts go away, but the bills still keep coming in, so you will need a long-term strategy. It is also possible to borrow money again, but you must rebuild your credit slowly. To get a realistic view of what a decade of limited creditworthiness feels like, contact a Plantation chapter 7 bankruptcy lawyer.
How a Bankruptcy Filing Affects Your Credit Score
Filing for bankruptcy protection results in a net reduction of your credit score, at least in the beginning. When the bankruptcy court discharges your debts, they show up as discharged. In a chapter 13 bankruptcy filing, your credit report also reflects that you are keeping up with the payments on your court-ordered debt repayment plan. Meanwhile, the bankruptcy filing itself remains visible on your credit report for a long time, and this is the biggest red flag for prospective lenders, leasing offices, and anyone else who might view your credit report. A chapter 13 bankruptcy filing stays on your credit report for seven years, and a chapter 7 bankruptcy filing stays visible for a whopping ten years.
Is Having a Low Credit Score Worse Than Owing Debts You Can’t Pay?
A low credit score is far from the worst financial problem you can have. Credit scores change all the time, and everyone who has cleared the highest credit score hurdles, such as qualifying for a home mortgage, once had a low credit score, if only because they had very little history of borrowing. After a bankruptcy filing, you should rebuild your credit score little by little, by taking out secure loans. This means borrowing for things you could pay for in cash. Yes, it is more straightforward to pay $200 for back-to-school clothes than to pay $200 for a secured credit card, charge the clothes on the card, and then pay it off, but in the long run, it is better for your credit score. You may even find that living on a cash diet suits you, and you don’t want to go back to borrowing. The good news is that the bankruptcy filing will eventually disappear from your credit report, and some of the bills you pay without borrowing help your credit score, but the process is slower than if you actively rebuild your creditworthiness.
Work With a Debt Lawyer About Bouncing Back After Bankruptcy
A South Florida debt lawyer can help you be successful in your bankruptcy filing and enjoy greater financial stability afterward. Contact Nowack & Olson, PLLC in Plantation, Florida to discuss your case.