How Long Does Bankruptcy Affect My Credit Score?
Posted By The Law Office of Pamela J. Helton, P.A.
According to Debt.org, Americans owe a total of $11.4 trillion in debt for credit cards, mortgages, student loans, and other expenses. The housing market crash caused many Florida homeowners to lose half the market value of their homes and Florida is considered one of the hardest hit markets in the recession. With that in mind, it should come as no surprise that many Americans chose to file bankruptcy to help relieve their debt burden during the recession.
Although bankruptcy is an effective way to get relief from overwhelming debt, it is not without consequences. Specifically, bankruptcy will impact your ability to open new credit lines for some time after the process is complete. There are ways to improve your credit in the meantime, but it can take as long as a decade before the bankruptcy is off your record.
Chapter 7 vs. Chapter 13
The two main types of bankruptcy for consumers are Chapter 7 and Chapter 13. Chapter 7 is what comes to mind when most people think of bankruptcy, as it completely clears many, if not all, of your unsecured debts. Chapter 13, on the other hand, is more of a reorganization of debt. You will still owe the money (or at least a chunk of it), but it is organized into an affordable payment plan to help you regain control over the situation. Bankruptcy reporting can stay on your record for as long as 10 years.
Can I Improve My Credit Score Before Bankruptcy Disappears?
It’s certainly not impossible to obtain a home loan, auto loan, or open a credit card after bankruptcy, but it can be more difficult. If your credit was particularly bad before the bankruptcy, you will likely have trouble qualifying for any large or premium credit lines. However, there are many steps you can take to begin rebuilding your score. Perhaps the most important thing to do after bankruptcy is paying your bills on time.
Considering Bankruptcy? Call Our Firm Today.
For those who are feeling overwhelmed by tax debt, the benefits of bankruptcy can far outweigh the consequences. If this sounds like you, call The Law Offices of Pamela J. Helton, P.A. today.