Credit scores are a common concern for people who are considering bankruptcy. In fact, worries over credit scores are a common reason why people sometimes wait to file their cases. Although bankruptcy affects your credit scores, chances are you have more important things to worry about if you are considering bankruptcy.
How Bankruptcy Could Affect Your Credit
Bankruptcy’s effects on credit scores will vary from person to person, but there are some universal rules. For Chapter 7 cases, the bankruptcy does appear on your credit for up to 10 years from your filing date. Chapter 13 cases remain on your credit reports for seven years after they conclude.
It is important to understand that not filing for bankruptcy could have an even more negative effect on the long-term health of your credit scores. For example, creditors are still going to report unpaid debts to the three credit bureaus after a certain period of time. These items will also remain on your credit reports for years to come. If you lose your home to foreclosure, that will also be reported on your credit history.
On the other hand, bankruptcy could help you discharge the debts that are causing you financial turmoil. Not only could bankruptcy allow you to discharge debts, it could also help you avoid foreclosure and other collection attempts. Simply put, bankruptcy allows you to get a fresh start so you can begin rebuilding your credit. Should you choose to wait, you are most likely delaying the time it will take to begin rebuilding your credit scores.
Rebuilding Your Credit After Bankruptcy
We find that many of our clients are able to significantly improve their credit scores after filing. However, there are certain steps you should take to ensure this happens. To improve your credit scores after bankruptcy, you should:
- Make timely payments. You should do everything in your power to avoid making late payments going forward. Timely payments show creditors that you are consistently financially stable. Late payments show the opposite, and they will negatively affect your scores.
- Maintain steady employment. To remain financially stable, it is important that you maintain a source of income. The easiest way to do this is by staying employed. If you lose your job, then consider picking up side-gigs, such as ridesharing. Do whatever it takes to maintain income so you can make timely payments.
- Avoid unnecessary expenses. Take the pre-bankruptcy debt counseling sessions seriously. Use it as an opportunity to identify your bad financial habits, such as unnecessary spending. Do you eat out a lot instead of cooking? Do you overspend on going out with friends? These are habits you should remove from your spending choices.
- Avoid taking on more debt. Much like you should avoid unnecessary expenses, you should also avoid taking on more debt than is necessary. Obviously, you cannot avoid all types of debt (such as car payments or an apartment lease), but you should avoid taking on more debt than you can handle. Put a budget together and identify which debts are affordable and necessary to rebuild your credit.
- Keep an eye on your credit scores. You should keep an eye on your progress. Fortunately, you can receive one free credit report from each credit bureau once per year. Many banks and other services also allow you to access credit information.
Questions About Bankruptcy? Contact Our Kansas City Bankruptcy Lawyers
We understand that filing for bankruptcy may seem like a scary idea. However, our attorneys have found that many people immediately feel better after they pick up the phone and call us. If you want to speak with one of our attorneys, then call us at (816)281-6349 or use our online case review form. Our law firm offers $0 upfront Chapter 13 bankruptcy filing options.