Credit bureau regulations allow information on a Chapter 7 or Chapter 13 bankruptcy to remain on a consumer credit report for up to 10 years after the commencement of the case, although sometimes an agency may remove it after seven years. But this unavoidable fact has some positive aspects. If you’re a candidate for bankruptcy, your credit is probably badly damaged already by late payments and excessive debt. Even if you have a perfect payment history, if you have more debts than you can pay using your income, you will have a poor credit rating and little or nothing to lose by filing bankruptcy. For example, many people struggling under mountains of debt cannot actually make payments on their debts, but instead transfer balances from an credit card to a new one or take cash advances on one account to make payments on another. They may have perfect payment histories, but they have no ability to pay their debts and their credit ratings will reflect that fact.
Filing bankruptcy can be a positive turning point in your credit history. It can even be the first step to buying a house. If your debts are so unmanageable right now that you’re contemplating bankruptcy, you probably can’t afford house payments. Getting rid of debt in bankruptcy will increase your disposable income and make you a better credit risk from the perspectives of most lenders. People who exercise sound financial management after bankruptcy will begin to rebuild their credit quickly, and can generally qualify for real estate mortgages and car loans within a couple of years. To help you out, you may also hire san diego bankruptcy lawyer.
Other forms of credit may be available even sooner after filing bankruptcy, although probably not on the most favorable terms. Credit cards may have lower balance limits and higher interest rates. They may have to be secured with a deposit that the issuing bank can draw on if you fail to pay. Secured loans may require larger down payments. There are some creditors who won’t lend to anyone who has ever filed bankruptcy, but for the majority of lenders your most recent debt transactions carry the most weight when you apply for new credit. Recovery from the consequences of bankruptcy takes some time and commitment, but if you keep your debts to a minimum and stay current on your payments, in a year or two you will be on your way to repairing the damage done.
It should also be noted that while a bankruptcy filing will not stay on your credit report forever, a lender, landlord or employer may sometimes ask if you have ever filed bankruptcy. There is no reason why the question can’t be asked, and in some contexts, it may be a legal offense to answer falsely. This said, if you are drowning in debt now, in the long run bankruptcy can do your already damaged credit more good than harm.
