As a Tulsa bankruptcy attorney I’m often asked how Bankruptcy Affects Your Credit. The truth is that answering this question is a little different depending on your particular case. The most important thing to realize is that bankruptcy’s impact on your credit score isn’t permanent and can be improved shortly after we file your chapter 7 case. Unfortunately, there are a great number myths that are perpetrated by financial institutions and the media about How Bankruptcy Affects Your Credit. The unfortunate effect of these myths is that they may deter people who might otherwise file and get a huge benefit by eliminating their debt.
Your Current Credit Score
While it is certainly true that bankruptcy has a short-term negative impact on one’s credit rating, most people who filed bankruptcy improve their credit rating in the long-term. The first key point to keep in mind is that people with sterling credit who can afford to pay all of their debts on a monthly basis do not seek bankruptcy protection in the first place. By the time people consider bankruptcy, they usually have many derogatory accounts that are in collections, past due, closed or written off. Many of these accounts continue to accrue derogatory comments and lower debtors’ credit rating as they struggle under whatever financial hardships that they are facing. The important point is that if your credit score is bad before you file How Bankruptcy Affects Your Credit is that it that it gives you the chance to start rebuilding it.
How Long Does Bankruptcy Stay on Your Credit Report
Both chapter 7 and chapter 13 bankruptcy show on your credit report for
10 years. The debt will show that you don’t owe the creditor anything. The debt shows as discharged in bankruptcy. It really doesn’t matter how much debt you discharged in bankruptcy because it all shows up as forgiven in bankruptcy. It also doesn’t matter what the debt was for, its still shows up as forgiven in bankruptcy. The most important thing you understand is that just because the bankruptcy shows up doesn’t mean that it stops you from getting credit going forward. Rather, its a beginning point, a point from which you emerge without owing anything to credit cards, medical providers repossessions and most other unsecured debts.
When Does My Credit Score Improve
Admittedly, your credit must be re-built after bankruptcy, but the notion that it has been permanently destroyed is false. How Bankruptcy Affects Your Credit is going to depend on financial decisions that you make going forward. As soon as your bankruptcy is filed, you will start to receive solicitations from companies that offer credit. One reason this happens so quickly is that the creditor knows that all of your unsecured debt has been forgiven in the bankruptcy. Another reason is that the creditor also knows that you cant file another bankruptcy for 8 years. This leaves them free to try and lend you money that if you don’t repay they garnish your wages. Because you cant file for 8 years getting rid of them without paying is nearly impossible.
Buying a House After Bankruptcy
The myth that you cant buy a house after you file is flat out wrong. Its true
that home lenders will look at you more closely after you file bankruptcy but that’s not the end of it. After your Oklahoma bankruptcy is filed each home lender has their own requirements and limitations for making home loans after bankruptcy. The bigger ones and more popular lenders will make you wait a couple years after the bankruptcy is file and closed. After that its up to you to rebuild your credit by being responsible with your finances. Like before the bankruptcy creditors look to the time you have on your job and how current you are on car loans.
Car Loans After You File Bankruptcy
Once the case is filed local car loan companies will start mailing you offers to buy purchase another car. Again, they realize that most of your debt is forgiven and that you have disposable income. They also realize that like any other loan if you don’t pay they’ll come repossess the car. Once that happens you wont be able to get out from under for 8 years after your last case was filed. Buying this car may be helpful to rebuilding your credit but beware. Some of the creditors will offer you high interest rates or sell you way more then what you can afford to pay. Be smart and remember the old adage ‘Buyer beware”. Take this chance to rebuild your credit and part of this is done by being financially smart.
Getting Credit Cards After Bankruptcy
Once your Bankruptcy is filed in Tulsa Oklahoma credit card companies will try to get you to apply for their credit cards. The majority of them require that you put some money in an account and they use it as security for the money they lend you. Generally, the credit limit is low and the interest they charge is high. Once again, buyer beware. There are good lenders out there but there are also real predators too. The good lenders will start you off slow but if you pay the balance at the end of each month and you’ll be surprised at how quickly they increase the limit and take of the requirement that you provide security.
After a period of re-establishing your credit with these kinds of secured cards, you will find you start receiving “real” credit card offers. These will likely have high interest rates, but as long as you are careful about not accruing additional derogatory credit, you should start to get offers with better rates so you can transfer your balances. After two year, you may even become eligible for an FHA home loan.
