How Long Does Bankruptcy Affect Your Life?

When actor and Celebrity Wife Swap TV star Gary Busey filed bankruptcy in 2012, he said it was a wake-up call and an opportunity to create better money management habits. Unfortunately, many bankruptcy debtors don’t answer the phone and don’t make necessary lifestyle changes. These debtors often anxiously watch the calendar until the seven or ten-year waiting period expires, so they can file bankruptcy again.

If you answer the wake-up call, make lifestyle changes, and continue working with a Chicago bankruptcy lawyer, bankruptcy might not affect your life for more than a few months. Officially, bankruptcy filings don’t fall off credit reports for seven or ten years, depending on the circumstances. However, if former debtors diligently work to rebuild their credit scores, by the time this waiting period expires, they may not even remember that they filed.

Bankruptcy Recovery Starting Point

According to popular myth, bankruptcy “ruins” your credit. That’s simply not true, mostly for the reasons examined below. To be sure, bankruptcy knocks debtors down the ladder. But it doesn’t knock them all the way down the ladder, and it certainly doesn’t knock them off the ladder.

To most people, bankruptcy is a last resort. So, by the time they file, repeated late payments, charge-offs, and other negative information have significantly lowered their scores. Furthermore, most people can expect about  200-point hit. So, a bankruptcy filing doesn’t make a good credit score a terrible one. Instead, bankruptcy makes a bad credit score worse.

Additionally, filing bankruptcy often looks better than repeated charge-offs and the other aforementioned information. This data indicates that the debtor quit, and no one likes a quitter. If you filed bankruptcy, at least you did something.

That’s especially true for Chapter 13 filers, since these debtors repay most delinquent secured debt, such as past-due mortgage payments, as well as a significant chunk of their crest card bills and other unsecured debt, at least in most cases. So, if a fast recovery is a priority, you and your Chicago bankruptcy lawyer should seriously consider filing Chapter 13, as opposed to Chapter 7.

Tips to Improve Your Post-Bankruptcy Credit Score

Another popular myth, and we really have no idea how this one got started, is that paying cash for everything raises your credit score. But a FICO or other score measures your ability to use credit responsibly. So, that’s what formed bankruptcy debtors must do.

A secured credit card is often a good start. Anyone with any credit score usually qualifies for such a card. The initial deposit is simply higher or lower, depending on your score.

Don’t let the card sit in your wallet. Use it. Charge something every month, pay the balance in full every month, and watch your credit score rise.

Chapter 13 is usually a better jumpstart bankruptcy than Chapter 7. When the judge closes the bankruptcy, many people keep making monthly debt consolidation payments. But instead of paying the bankruptcy court, they pay themselves. After two or three months, most families have a substantial financial reserve.

Furthermore, some retailers work with damaged credit buyers. For example, a furniture store might report the full purchase price, as opposed to the discounted purchase price, to credit reporting agencies. As a result, it looks like the debtor borrowed more money. Large loans definitely increase credit scores, assuming you make the payments.

Connect With a Tough-Minded Cook County Lawyer

No matter what kind of financial problem you are having, bankruptcy could be a way out. For a confidential consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.

Source:

abcnews.go.com/blogs/business/2012/02/gary-busey-files-bankruptcy-just-like-gm-he-says