How Your Credit Will Be Effected by Bankruptcy

If you are behind in paying your bills, your credit is already effected. Filing a bankruptcy may actually be your first step in repairing a bad credit situation. When a creditor finds a bankruptcy on your credit report, it shows them that all prior credit problems have been resolved. The question then becomes, “Are you creditworthy?”

Every creditor is different and each one treats bankruptcy with a different set of rules for determining your creditworthiness. Although there are many exceptions, normally a creditor likes to see how well you do in paying your bills during the first year or two after filing bankruptcy before they extend new credit to you. So although a Chapter 7 bankruptcy appears on your credit report for ten (10) years, and a Chapter 13 appears for seven (7) years, most people only find it to be a problem for a couple of years after filing — provided everything else looks good on their current credit report.

In addition, there are 1,000’s of creditors who extend credit to people who have filed bankruptcy. The interest rates are normally higher, of course, but you can obtain credit easily with one or more of them. One of the best ways to build your credit after bankruptcy is to obtain a “secured” credit card. This is one where you put money in a bank and the bank issues you a credit card. The credit limit of the credit card will be the same amount of money you have in their bank. After you have shown that you make timely payments, your credit line may be increased without you depositing any more money.

However, the fact remains — one of the main reasons for filing bankruptcy is to get OUT of debt — not back into it. You should take responsibility for your own financial spending and saving, making sure not to get to the point where you have to file another bankruptcy. Once you experience total freedom of paying for things you want to buy, and owning them free and clear — you will enjoy life more and grow as a human being. About the only items the average American really needs to go into debt for is an automobile for transportation and a home for their family to live in. Everything else should be purchased out of the monthly income, or saved for and purchased in full. The only reason Americans are in debt is because they “want it now!” and don’t have the patience to wait.