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What Will Bankruptcy Really Do To My Credit?

By: Scott Scurfield

One of the first questions people ask when they call us about bankruptcy is, “What will happen to my credit rating?” We typically answer that question with another question: “What is it like now?” If your credit score is already low, then elimination through bankruptcy of past debt that you were likely never going to pay off is certainly no worse, and may be preferable, to spending another ten or fifteen years “robbing Peter to pay Paul” with sporadic, minimum, or late payments that further drive down your credit score.

Your post-bankruptcy ability to obtain credit depends on a lot of things besides the fact that you filed bankruptcy during the preceding ten years. More significant is your income and the debt you have when you apply for new credit. Prospective creditors are not prohibited from extending you credit simply because you filed for bankruptcy; in fact, eliminating past debt makes you more able to pay future debt. If you come out of bankruptcy with a steady stream of income, there are creditors out there who will lend you money or issue you credit cards. In the meantime, there are a number of things you can do after your bankruptcy to rehabilitate your credit rating, including:

  • Making timely payments on any debts that survive your bankruptcy, which often include car loans and student loans.
  • Paying your rent or mortgage and your utility bills in full and on time each month;
    Getting a car loan (if possible) and making timely payments (though you may have to pay higher interest rates for a few years);
  • Obtaining and paying in full each month a secured credit card (works like a debit card), being sure to never exceed the credit limit (which is usually $500 or less); and

Eliminating your debts through bankruptcy and then following this simple plan is a proven way to re-establish a credit rating that might otherwise languish or get worse without the fresh start provided by bankruptcy.

If you or someone you know is so deep in debt that their credit rating has already hit rock bottom and they need to find a way back up, call our firm for a free consultation, or surf to www.defendmyrightsnow.com/bankruptcy.html to learn more.

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