Debts are piling up. Bills are coming in. Collections agencies are phoning and sending you certified mail demanding money. These financial worries are more than you can handle. Where do you turn?
Each year, millions of Americans will decide to file for personal bankruptcy, either Chapter 7 or Chapter 13, depending on their situation. While Chapter 7 Bankruptcy wipes your slate clean of debt, Chapter 13 allows you to pay off your loans under a restructuring arrangement set forth by you and the court.
Understandably, a big fear for those Americans who choose to file Chapter 7 or Chapter 13 Bankruptcy is how and when they will be able to regain their credit. The following should help you understand that the future is bright for those who choose bankruptcy, as long as you commit to changing your old spending habits.
Filing bankruptcy does not stop you from getting new credit. Many lenders target the recently bankrupt as customers. And now is the time to begin credit repair. Immediately after a bankruptcy filing, you can expect credit to be harder to get, more expensive, and limited in amount. However, it is important to start using credit to confirm to the creditors and yourself that you have learned from your past mistakes and can commit to paying your bills on time, using only a small portion of your available credit and not applying for too much credit at once.
Eighteen to twenty-four months after a bankruptcy release, bankruptcy debtors can be eligible for a loan on the same terms as if they had not filed bankruptcy. This means that the lender will be more concerned with your down payment, the stability of your income, and the relationship between the loan payments and your monthly income than your past financial troubles.
A bankruptcy will remain on your credit report for up to 10 years, but its effect on your credit score can start to diminish the day your case is closed. Credit reporting agencies must present an accurate history about your financial affairs. You want to make sure that the bankruptcy discharge also shows on the credit report so creditors understand that those old creditors have no legal claim remaining. Be certain to conduct a yearly review of your credit report from the 3 major agencies – Equifax, Experian and TransUnion. It is essential to correct any inaccuracies as quickly as possible, in order to ensure a true picture of your financial situation.
In conclusion, it is important to understand that filing personal bankruptcy, either Chapter 7 or Chapter 13, is not the end of your financial credit future. It is just the beginning. You’re being given a new start on your financial life. Hopefully this time you will make better choices and become the financially secure person we all desire to be.
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