The Short- and Long-Term Impact of a Bankruptcy on Your Ability to Obtain Credit
There’s a common misconception that filing for bankruptcy protection will be the death of your credit rating, that you’ll be forced to pay cash for everything for the rest of your life. That’s simply not true. Though the immediate consequences will make it difficult or impossible to secure any type of credit for a period of time, there is life and credit after bankruptcy, provided you do the right things.
What Immediate Impact on Your Credit Can You Expect After a Bankruptcy?
All credit reporting agencies routinely gather information found in the public records, such as judgments, liens, and bankruptcy filings. Accordingly, you should expect that all credit reporting agencies will factor in your bankruptcy when calculating your credit score.
There is no fixed or specific adjustment that will be made to your credit score after a bankruptcy, but you can typically expect a 100-to-200-point drop.
The Long-Term Consequences of a Bankruptcy on Your Creditworthiness
Though the bankruptcy will cause an immediate drop in your credit score, you can start rebuilding almost immediately. The best way to do that is to make all your monthly payments in a timely manner. As you continue to do that, your score should start to creep back up. After a number of years—about 10 years with a Chapter 7, and 7 years with a Chapter 13—the bankruptcy will fall off your credit report.
It’s also important to understand that, while some potential creditors look only at your credit score, many lenders consider a number of factors, often focusing on what you’ve done since the bankruptcy. If you have consistently honored your financial obligations, they may be willing to extend you credit on the basis that you’ve developed better financial skills.
Contact Attorney Howard N. Sobel
At the office of Howard N. Sobel, we provide personal bankruptcy counsel to people throughout the state of New Jersey. Contact our office online or call us at 856-424-6400 to set up a free initial consultation. Evening and weekend appointments can be arranged upon request. We accept all major credit cards.
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