What You Should Know About Bankruptcy and Your Credit

Bankruptcy and Your CreditUnfortunately, 2021 hasn’t been a good year for many people financially. The tough economy has led to furloughs and layoffs, leaving people in a disastrous financial position. Even if you’re lucky enough to have been able to return to work, you may find that you’re still faced with a reduction in pay or hours.

When faced with financial issues, you must make some tough decisions at the end of the month. You need to decide which bills to pay now and which ones to pay later. The thought of filing for bankruptcy may even cross your mind. You may wonder how the process will affect your credit, especially if you eventually want to buy a home or vehicle. Before deciding, you should know a few things.

How Filing for Liquidation Affects You

It’s challenging to arrive at the decision that you need to file for liquidation. You may feel ashamed, and you may have thoughts that you’ll never recover from doing so. These feelings are something that you should seriously address. Here are a few things you should know while doing so.

How Your Credit is Affected

There’s no way around it. Bankruptcy will affect your credit for a while. For instance, if you file a Chapter 7, it’ll show up for up to 10 years. Any of the discharged debts (whether reported or not) will show up for as many as seven years from the date of your delinquency.

When you file for a chapter 13 bankruptcy, it’ll show up on your credit report for up to 7 years. The discharged debts that weren’t on your credit report before you filed will show up until they eventually fall off. Typically this will happen at around the same time as Chapter 13 disappears from your credit report.

How to Rebuild Your Credit

Your life isn’t over just because you file for bankruptcy. Some of the proactive steps you can take to improve your credit score include:

  • Periodically take time to review your credit report. Make sure that you have any errors you find fixed. It’s also essential to ensure that discharged debts show a zero balance.
  • Make all of your payments on any remaining debts on time. If you make a late payment, it could negatively impact your credit score. This damage isn’t something you want since your credit score has already been damaged.
  • Maintain a low credit utilization ratio. This ratio is the amount of credit you have available for use compared to the amount of credit you have available to use.
  • Obtain a secured credit card. While you’ll need to place a security deposit that’ll serve as your credit limit, doing so will help improve your credit. Your other option is to become an authorized user on someone else’s credit card.

File for Bankruptcy Today

After some serious consideration, you may discover that this is the only way you’ll be able to climb out of debt. At the Weller Legal Group in Clearwater, FL, we empathize with you when you reach this point. We’ll work with you to see that you shouldn’t dread this procedure. Instead, you should embrace it as a way to settle unmanageable debt and move forward to embrace fresh financial footing.

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