Can You Restore Your Credit After Bankruptcy?

Debt can happen to anyone. People from all walks of life, small businesses, and even large multinational corporations can suddenly develop so much debt, or money owed to other parties, that they cannot seem to pay back. 

Common sources of debt include credit card transactions, home loans, and car loans.  People can also lose their income and find themselves unable to continue making reasonable debt repayments. However you find yourself deep in debt, filing for bankruptcy may be an appropriate solution. According to the US Courts, “bankruptcy helps people who can no longer pay their debts get a fresh start.” This court-operated process involves reviewing your debts, assisting you to find debt relief, and helping you regain financial stability.

However, the consequences of bankruptcy can be serious. Most people lose credit after bankruptcy and find themselves struggling to rebuild. Believe it or not, a low credit score can affect your ability to find a home or even a job. Thankfully, there are ways to restore your credit after bankruptcy.

Why File for Bankruptcy?

Bankruptcy is the only real solution in the US to enormous debts. While collections agencies and other long-term payment plans can help you reduce your debt, bankruptcy court gives you a platform to share your specific financial needs, get personal assistance to find additional funds, or make plans to repay on more generous terms.

Bankruptcy cases are surprisingly common, too. Nearly half a million people and businesses have filed for bankruptcy in the past year, and there is no shame in pursuing this financial solution. File with a bankruptcy attorney for a less stressful bankruptcy process, and to improve your chances of success.

Chapter 7 and Chapter 13

These “chapters” refer to specific types of bankruptcy for which you can file. Each has its benefits. Chapter 7 bankruptcy allows you to amass funds by selling off assets that you own, like furniture or a vehicle, and use the profits to pay down debts. This is known as “liquidation”.

Chapter 13 bankruptcy, meanwhile, is referred to as a wage earner’s plan, and creates a reasonable payment arrangement under which you can pay down debts. Many people who file for Chapter 13 are given as long as 5 years to repay.

What Happens to Your Credit?

Unfortunately, when you file for bankruptcy, your credit score immediately plummets. In fact, a former bankruptcy will remain on your credit report for as long as 10 years. This can have multiple impacts on your life after bankruptcy. 

Why Is Credit Important?

Your “credit” is a numerical score that banks and other lenders use to score how trustworthy you are with finances. Your credit report will contain a history of financial activity and any debts you may owe. Consumers gain credit by taking on debt and paying it off within exact terms: for example, making car and credit card payments on time. Show signs that you’re trustworthy and your credit score will improve. Show signs that you’re less trustworthy–like making late payments–and your score will decrease.

Your credit score affects numerous things. First of all, it can affect the interest rates you pay on a variety of loans, including a home mortgage and a financing plan for electronics. When your credit score is lower, institutions will charge you more money for opening a line of credit. You can pay up to 20% interest in some cases, whereas someone with an excellent credit score can pay less than 5% on the same type of loan.

The most negative way to think about credit is this: lenders are looking for people willing to take on high amounts of debt and pay it off with interest. How profitable are you to lenders? This is what big banks and other lending agencies want to track.

Unfortunately, your credit score doesn’t just affect your finances. You need good credit in order to rent property like an apartment, lease a car, and even apply for a job. While this may sound like the end of the road, there are steps that you can take to rebuild your credit and establish a more stable financial future–even with a bankruptcy on your record. 

How Do You Rebuild Credit?

Credit is a dynamic figure, meaning that it changes all the time based on your actions. Strangely, your credit score may dip a little when you read your credit report. However, the opposite is possible, too. Rebuilding credit is possible with the help of a bankruptcy attorney. You may hire an attorney to help you file for bankruptcy, guide you through collecting records, and even represent you in bankruptcy hearings.

Many of these attorneys also offer credit rebuilding services so you can return to a normal life after bankruptcy. They may provide services like financial advice to avoid debt, better credit reporting, updating credit score information with the relevant offices, opening low lines of credit to boost your score, and even fixing any errors that can make your credit score worse. 

Over time, credit rebuilding services can help you achieve a good credit rating similar or even better than your pre-bankruptcy score. Rebuilding credit improves your ability to secure large loans, like a mortgage, and can even improve your job prospects. Some credit rebuilding tasks are so successful that there have been cases of consumers buying a new house before their bankruptcy case has closed.

Just be sure to find a legitimate service, like a legal firm, for assistance. Avoid credit-fixing scams at all costs. There are scammers willfully taking advantage of debtors as they try to improve their financial and personal lives after bankruptcy.

Restore Your Credit with Blue Bee

If you are worried about your credit when filing for bankruptcy, contact the law offices of Blue Bee Bankruptcy, conveniently located in Salt Lake City, Utah. Our experienced bankruptcy attorneys will help you to file for bankruptcy so you can find a way out of debt. Our services don’t end there. Unlike other bankruptcy attorneys, we will not only help you throughout your bankruptcy process, but assist with rebuilding your credit score after filing. Visit our Credit Rebuilding page for more details.

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