This is a question that we Riverside bankruptcy attorneys get quite often: how will filing for bankruptcy affect the ability for someone to get credit in the future? While I certainly don’t want to seem like I’m minimizing what people are going through, if you are in a position where you need to file for bankruptcy your credit score is probably already as low as it can go.
However, to answer the question fully, Chapter 13 will immediately be listed on your credit report. It is a matter of public record and all financial public records are attached to your credit report. It will have an impact on your credit score, but it is not the greatest factor at play. Truthfully, your amount of available credit is the largest percentage of your score. The next big factor is recent payment history. Considering that many credit card companies will offer you lines of credit the moment you file for bankruptcy (it’s a safe bet for them since you cannot file again for two years), you can raise your credit score from the moment you file bankruptcy.
How you handle debt in the future will have the greatest impact on your credit score—more so than bankruptcy. Bankruptcy is no different than any other item on your credit report. All negative information will remain on your credit report for seven years. The goal is to responsibly build credit again, first, using secured credit cards, and second, repaying the debts according to the court’s mandates. I would have said debt repayment first, but that will take 3-5 years under the court dictated plan so this Riverside bankruptcy lawyer would advise you to start with a secured card so that you can prove your ability to manage credit.
Right now, if you are overwhelmed with debt, making late payments, and in foreclosure your credit score probably can’t get any worse. That is the harsh truth. Filing for bankruptcy will enable you to begin to immediately rebuild. You will be making house payments on time, car payments on time, and if you get a secured credit card, you will have available credit at your disposal. This is an immediate improvement to the credit score, so even if there is bankruptcy on your credit report there will be enough positive factors to counter, factors not at your disposal now, that you will be back to where you need to be within a few years. As a Riverside bankruptcy lawyer I see this every day. I will hear from clients a year to year and a half later telling me how amazed they were to see their credit score no longer in the gutter.
There are ways to rebuild credit and to mitigate “black marks” on your credit report even if you’ve filed for Chapter 13.
Your credit score is hurt worse by defaults, late payments, and zero available credit than if you file for bankruptcy. And that is the simple truth of the matter according to this Riverside bankruptcy attorney.
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