Though there is no doubt that filing for bankruptcy will have a strong negative impact on your credit score – the most significant negative impact of any single event – to say that it will ruin your financial future is probably overstating reality. The truth is that even though filing for bankruptcy will have a big effect initially, it is probably the biggest step towards improving your credit that a person who is unable to pay their bills can take.

For some people who have gotten themselves into intractable debt, filing for bankruptcy actually raises their credit score. This may sound impossible, but bankruptcy eliminates debt that has previously been weighing your score down.

The reality of the impact of filing for bankruptcy is that it will show up on your credit report for several years, and that can serve as a potent warning to potential lenders. But what is more important is what you do in the months and years between your bankruptcy filing and your new credit applications. To offset the negative impact of a bankruptcy filing you need to prove to the world that you’ve learned your lesson. You do this by applying for new credit cards, even though they are going to offer you less favorable terms. Then you need to pay them off every month.

Having a bankruptcy filing on your credit report is not going to keep you from being able to borrow money in the future. What it is likely to do is to force you into loans that have less favorable terms. You’re going to have to pay higher interest rates and any potential for a grace period is going to be unlikely.  But the same was probably true before you got around to filing for bankruptcy because your debt situation and payment history were probably so bad before you took action to address the situation. If you were behind on your bills before your filing and now you are up to date on your bills, that will be obvious to potential creditors and may offset the bankruptcy itself.

To rebuild your credit after a bankruptcy filing, you should start by applying for a secured credit card and then staying up to date on payments. Doing so will allow you to show potential creditors that you have learned from your mistakes and are deserving of their trust. It’s a building process that is only made possible by taking the step of getting yourself out of your overwhelming debt.

For assistance in assessing the best way for you to approach and deal with your debt, contact our bankruptcy attorneys today to set up a time to talk.

 

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