The creditor letters have become overwhelming. You're tired of answering the phone to find it's another bill collector asking how you'll pay your bill. Filing for chapter 7 bankruptcy will stop those calls quickly, but you're hesitant to proceed for fear of what it will do to your credit rating. Here is the truth of how filing bankruptcy impacts you and why it may be the right move for you.
How Bankruptcy Impacts Your Credit Report
As you wait to file for bankruptcy, the creditors keep calling, late fees keep piling up and you run the risk of legal actions being placed against you for payment. Every one of these activities can generate a note on your credit report from companies trying to collect payment from you. The longer you struggle with your debt, the more notes are added to your report.
When you file for bankruptcy, all of this stops. Your bankruptcy lawyer sends notices to all of the creditors indicating that you have filed and they must stop their collection attempts, legal actions and any motions to garnish your wages. Notices placed on your credit report will stop, as well.
As long as you wait to file, notes continue to be added to your credit report. It will be more difficult later explaining to future lenders all of the notes on your credit report than the one bankruptcy entry.
You Lose Your Credit Rating and All of Your Credit Cards
You do lose access to any credit cards and credit lines you have, but they are likely one of the reasons you found yourself over your head in debt. Your credit rating remains fixed for awhile as you slowly begin building it back up. Shortly after your bankruptcy is discharged, you will be able to take on some minor debt and start creating a positive credit rating again. Initially, you'll deal with low-limit, high-interest credit cards. Be prompt at paying these bills and you'll soon have access to more of the credit options you were once accustomed to.
It Will Be Hard to Get Credit
But not impossible. Because you can only file for bankruptcy every few years, some lenders see that as a positive thing. If they offer you credit, they know that you won't be able to default on your account with them. The worst that could happen is that you file for chapter 13 bankruptcy which forces you to establish a payment plan with them, unlike chapter 7 which gets rid of the debt entirely.
Some credit card companies offer high-interest credit to people who have just filed for bankruptcy. Buy here/Pay here car dealerships can get you into a car despite your credit status. Some banks offer combined credit/debit cards that require you to deposit a sum in the account from which you'll be drawing. These are all ways to create good notes on your credit report and a positive credit rating.
The decision to file for bankruptcy is a difficult one. Look at how your current financial status affects your credit report every day. Filing for bankruptcy now may be the one thing that eventually improves your credit rating. Talk to a professional like Klafter & Mason LLC for more advice.Share