No one plans to file for bankruptcy. But when things happen beyond your control, it may be the best option. Bankruptcy is an effective process for wiping away or reducing debt that you can’t afford to pay. If you’re searching for filing help in Milwaukee, the Bankruptcy Law Center, LLP can help.
The good news is that not all bankruptcies cause a big drop in credit scores. In fact, it is theoretically possible that your credit score could rise following a bankruptcy. However, any negative effect can make it more challenging to acquire credit in the future. Therefore, it will take consistent time and effort to restore your financial good name after filing.
How Will Bankruptcy Affect My Credit Score?
If you are behind on your bills, your credit might not be very good. Many people who are considering filing for bankruptcy tend to already have low scores. In this case, bankruptcy will likely not make things any worse. Your scores will likely take a dip first, but they won’t take a huge plunge.
It’s possible that filing for bankruptcy can actually increase your credit score over time. This occurs because bankruptcy can potentially clear negative items from your credit report – leaving only the bankruptcy itself as a negative remark. If, on the other hand, your credit is good before you file for bankruptcy, then your scores will take a much bigger hit post-filing. In either case, we’ll be here to help you prepare for life after bankruptcy and get you back on your feet.
Do All Bankruptcies Have Equal Impact?
Generally speaking, people with good to exceptional credit scores will see the most notable impact of bankruptcy. If your credit score is already fair or poor—below 670—you may not see large point drops. The type of bankruptcy you file and the amount of existing debt that you have can have varying effects on your credit score. That said, let’s explore the differences between filing for Chapter 7 bankruptcy and Chapter 13 bankruptcy.
- Chapter 7: The basic idea of a Chapter 7 bankruptcy is to wipe out (discharge) your debts, such as credit cards, medical bills, and past-due utility bills. It is a highly effective way to improve your financial situation and obtain a fresh start. However, Chapter 7 bankruptcy does not eliminate the right of lienholders to repossess or foreclose if you fall behind on payments.
- Chapter 13: This type of bankruptcy is a reorganization of your debt. You will file a “plan” showing how you will pay off some of your past-due and current debts over 3 to 5 years. Chapter 13 will allow you to catch up on past-due amounts on your secured property and pay back your unsecured credits with no interest at an amount you can afford.
How to Rebuild Credit After a Bankruptcy
When determining your credit score, your payment history is one of the most important factors.
Since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills. A bankruptcy typically remains on your credit report for 7 to 10 years, giving you the opportunity to improve it during this time. Here are a few things you can do to help rebuild your credit:
- Monitor your credit: Be sure to frequently check your credit score and credit report. This will ensure that you are aware of the progress you’re making and give you the opportunity to address any potential issues before they cause further damage to your credit score.
- Pay your bills on time: Paying your bills on time is an important aspect of taking control of your financial life. It’s important to make a note of when your bills are due and make a habit of paying them off by the deadline to avoid late payments.
- Establish a budget and stick to it: Budgeting can help you control your spending, track your expenses, and save more money. Having a budget will allow you to mitigate unwanted surprises so that you can put your money toward things that are most important.
Have More Questions About Bankruptcy?
If you are overwhelmed by debt or facing foreclosure, you are not alone. The Bankruptcy Law Center, LLP is a local law firm specializing in Chapter 7 and Chapter 13 consumer bankruptcies. We have offices located throughout Southeastern Wisconsin ready to provide a simple and effective solution to your financial problems. Contact Bankruptcy Law Center today for bankruptcy filing help in Milwaukee.