While it is true that filing for bankruptcy is a serious blow to anyone’s credit-report, it is no longer completely true that, after a chapter 7 bankruptcy, it is impossible to rebuild your credit standing within a reasonable amount of time. The amount of time that rebuilding your credit actually takes varies from person to person, naturally, but, for many, filing for chapter 7 bankruptcy is actually the first step on the road to a renewed credit standing rather than the last, particularly if you are one of those whose credit health is in such a state of disrepair that a bankruptcy discharge actually is an improvement of sorts, in that it allows some positive progression to be made rather than a never-ending cycle of minimum monthly charge payments, late-payment fees, collection lawsuits, and garnishments.
It is an unavoidable truth that a bankruptcy will remain on your credit-report for up to 10 years, of course. The bankruptcy itself will be an obvious detriment for several years, but, eventually, it will be a detriment for future credit lenders examining your report to take into the context of, first, your report as a whole and, additionally, your baseline FICO score. In other words, the bankruptcy can be balanced out somewhat by the steps you take in the first few years immediately following your bankruptcy discharge to rebuild your credit.
These steps will be obvious once your discharge is received in that, at least assuming our current credit-crunch magically eases at some point, credit-card issuers and other credit-lenders now, in the wake of the deregulation of the banking industries in the Clinton and Bush years, actually target post-discharge bankruptcy filers as what they believe to be a viable market-segment for their business. After your discharge, you will receive credit card and other solicitations fairly shortly. Most of these will be high-interest offers that you should avoid like the plague, generally, but, at some point, an offer will be made that will not look too badly that you may consider accepting in order to begin rebuilding your credit. Naturally, you’ll not want to end up in the same situation again and will want to be sure to pay off any new balances each month, but the opportunity will be there to begin rebuilding your credit the old-fashioned way: through the use of credit. Additionally, for FICO purposes, the bankruptcy discharge itself, which liquidates most of your actual debt, improves your income-to-debt ratio instantly.
Again, since you won’t be able to file for bankruptcy again for a number of years, you’ll need to be extremely careful accepting new sources of credit so that you don’t fall into the same personal crunch that led you to file bankruptcy in the first place. But, unlike in previous decades, when a bankruptcy discharge really did drop a nuclear bomb in the middle of your financial existence for many years, it is now possible to genuinely view a bankruptcy as a fresh start, if you handle it properly and don’t fall back into old habits.
If you have questions about the impact of bankruptcy on your future ability to borrow, please contact the Law offices of Chirnese L. Liverpool at (818) 714-2200 to schedule a free, initial consultation.
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