I am often asked how a credit report will it look after filing Chapter 7 Bankruptcy. The answer in most cases is — not as good as it did before bankruptcy. But that isn’t necessarily a reason not to file. And in some cases, filing for bankruptcy may actually improve a credit score.
According to a spokesperson for Experian, one of the major credit reporting bureaus, “In virtually every instance, the consumer will already have repayment problems such as late payments, very high balances, charged-off accounts or collection accounts.” In other words, a person on the brink of bankruptcy probably already has problems with their credit score.
Additionally, filing for bankruptcy does not mean lenders won’t be willing to extend credit after the debtor emerges with a clean slate. There is no law that says a creditor cannot loan money to someone who has filed for bankruptcy. There is always someone willing to loan money and today there are creditors who actively solicit business from people who have recently filed bankruptcy. Bankruptcy gives a person a “fresh start” and potential creditors want to be first in line to be your new credit card company.
Most people will only file one bankruptcy in their life. Creditors, who have to make loans to make money, might hope that the debtor learned from the experience and will be less likely to put themselves in a similar bind.
Additionally, a debtor may not file another Chapter 7 bankruptcy for a period of six years.
There is no question that a bankruptcy will impact a person’s ability to get credit. But by the time a person is in a position of insolvency, their credit score is already, or very close, to going into a tailspin. The beauty of a bankruptcy discharge is that it tends to clear away a plethora of past-due accounts and may, in certain circumstances, result in an improved credit score. The fact that you filed a chapter 7 will appear on your credit record for ten years but that won’t stop creditors from loaning money.
Generally, the best way to restore your credit after filing a bankruptcy is to pay your bills on time. Additionally, it is important to review your credit bureau scores to make sure there isn’t a “hangover” from the past. Typically, the credit report of a person emerging from bankruptcy shows accounts as open and overdue, but the credit report should show that the accounts were closed and the debts wiped out as part of the bankruptcy. These problems can be corrected by contacting the credit reporting agencies and demanding that the various accounts be included as settled by the bankruptcy.
Marc R. Tow
Real Estate and Bankruptcy attorney for 30 years.
Mortgage Broker for 20 years.
I have been in business this long because I actually think about for my clients.
Consultations are on the house.
Call today (949)467-1404. Source: Www.Towlawbankruptcy.Com
