Will filing bankruptcy ruin my credit forever?

No, it will not. In today’s economy, bankruptcy is becoming a much more frequent occurrence and the consequences of filing have drastically decreased in their severity. Normally, the only place that a bankruptcy can be viewed by a creditor is a credit report. And while the bankruptcy itself may impact a credit score, the credit score of an individual who is filing bankruptcy may actually improve when a bankruptcy is filed. This is due to the fact that people who file bankruptcy may have a lot of debt and not a lot of income, thus decreasing their credit score to begin with. When a bankruptcy is filed, almost all of the debt on a credit report goes to zero while income stays the same. Thus, this improves the credit score, giving most bankruptcy filers a better credit score after filing.

Today, those who file bankruptcy are able to obtain credit right after the bankruptcy process is complete (4 months in most circumstances). This includes obtaining new credit cards and car loans. However, the Annual Percentage Rate (APR) on these items may be high if they are obtained too soon. Therefore, an individual who files bankruptcy should spend about six months to a year raising their credit score to a point where the APR rises to a rate that is reasonable and similar to the rate obtained by the individual before the bankruptcy was filed.

An individual who files bankruptcy can increase his credit score almost immediately after the bankruptcy process is finished. This can be done by obtaining a secured credit card and using it like a regular credit card. In addition, any payments that are made to any reaffirmed debts (debts that are secured by a car or a house where a new contract is signed for these items during the bankruptcy) also count towards increasing the credit score of an individual bankruptcy filer. Therefore, in most circumstances, bankruptcy can be a new start for any individual who has come upon hard times.

Chang and Carlin Disclaimer
The content found on the Chang & Carlin site is not legal advice and is purely for informational purposes. The information contained herein is not a substitute for the advice of an attorney and does not create an attorney-client relationship. If you are interested in obtaining information about chapter 7 bankruptcychapter 13 bankruptcy, foreclosure services, real estate legal services, you are encouraged to call our law firm at 866-790-8601 or Request a Free Legal Evaluation. Chang and Carlin serves clients in Chicago, Schaumburg, Joliet, Warrenville, Waukegan, Illinois.