There are some people who assume that filing bankruptcy is going to ruin their credit score forever and make it impossible to obtain credit in the future. The good news is, these fears are unfounded. While bankruptcy does have short-term consequences regarding access to credit, it is often better for a person’s long-term credit rating than foreclosure and defaulting on loans.
This doesn’t mean that everyone filing bankruptcy needs to rush out and get more loans after their bankruptcy is complete. In most cases, it makes sense to make regular payments and work to re-establish credit, before taking out any type of significant loan.
A good credit rating is a score that is 650 or above. Once the mark is achieved, a person is able to shop for a car loan and receive competitive rates. Right after bankruptcy, the filer may have to pay more to receive credit, as well as higher penalties since creditors look at a recent bankruptcy as a significant risk.
If you have recently filed bankruptcy, then it is a good idea to work with your bankruptcy attorney in Orlando to see what your options. There is also more information found here.
Credit after a Chapter 7 Bankruptcy
A Chapter 7 bankruptcy involves a person selling off their assets to pay their creditors. Any debt that is not payable by the debtor is going to be discharged, with a few exceptions, the filers debt-to-income ratio typically improves right away. Also, those who file for Chapter 7 bankruptcy cannot file again for eight years, which means creditors feel more secure loaning money directly after the bankruptcy is complete. This also means that someone who is newly free from debt has to use caution to ensure they don’t fall into the same debt traps again.
Credit after a Chapter 13 Bankruptcy
With this bankruptcy, debt is split into manageable payments for a period of three to five years. When the payment plan is complete, any debt remaining is discharged, with several exceptions. After a person has stuck to a budget and made payments regularly during the Chapter 13, a debtor is typically better prepared to manage debt in the future.
Restoring Your Credit
Using common sense can help you improve your credit rating. This includes things such as paying your bills on time and not taking out credit that is unnecessary. It is also a good idea to have emergency funds put back. A smart goal is to keep 10 percent of your income in savings.
Also, always remain aware of offers that are “too good to be true” and avoid working with credit repair agencies. Taking out secured credit cards is a great way to restore a good credit rating and avoid excessive debt.
Contact An Orlando Bankruptcy Lawyer Today!
If you have recently filed for bankruptcy, and need help restoring your credit, speak with your bankruptcy attorney. You can also contact us to learn more about the steps you can take to help restore your credit.