How bankruptcy affects your credit

A bankruptcy filing is noted by various credit reporting companies. Federal law limits the length of time that this information may be carried on a report to ten (10) years. A bankruptcy shown on a credit report will adversely effect one’s credit. However, many of our clients have found that after filing bankruptcy, they can reestablish their credit over a reasonable period of time by promptly making the payments that they reaffirm, such as their car loans, house mortgage.

How difficult is it to improve my credit rating if I elect not to file bankruptcy?

The answer to this question depends upon how quickly you can bring all of your loans and accounts current. If you can do that quickly and bring your balances down on your credit card debt, then you can raise your score rather quickly. However, if your credit card balances remain close to your credit limit and if you continue to pay your debts late, then your credit score will probably continue to fall.

Can I borrow money to buy a car or house after my bankruptcy case is completed?

Many clients come into our office with the belief that if they file bankruptcy, then they cannot obtain any credit for seven (7) years. Actually, your ability to obtain credit at any time is normally based upon three (3) factors. Those factors are:

  • 1) your ability to repay the loan,
  • 2) the creditor’s collateral position, and
  • 3) your credit history or credit score.

If you have filed a bankruptcy, then your credit score is not going to be high immediately. However, as stated above there are things you can do recover as quickly as possible. Thus, filing a bankruptcy does not mean that you cannot obtain credit at all even immediately after completion of the case. Individuals that show the creditor that they now have the ability to repay a loan can in many cases obtain the credit necessary to purchase a car, but the longer one waits after bankruptcy, provided the borrower is taking the proper actions re-establishing credit, the lower the interest rate will be.