Jacksonville Credit Rebuilding Lawyer
Bankruptcy is not the end of your financial life. It is the beginning. Bankruptcy is meant to give you a fresh start so that you can chart your own path without the burden of your prior overwhelming debt. Yes, bankruptcy is going to affect your credit score. As long as you take the right steps before, during, and after your bankruptcy, however, you can move toward a complete financial recovery and financial security. The passionate and dedicated Jacksonville credit rebuilding lawyers at Albaugh Law Firm are here to help you every step of the way.
How Long Does a Bankruptcy Stay on Your Credit Report?
Bankruptcy will affect your credit score. There is no getting around it. But bankruptcy does not completely eliminate your credit, and the effects of the bankruptcy are only temporary. At the extreme end of things, bankruptcies do not stay on your credit report forever. A bankruptcy will stay on your credit report for a number of years after you file. The length of time depends on the type of bankruptcy and the nature of the individual debts.
Typically, a Chapter 7 bankruptcy filing will stay on your credit report for ten years as a “derogatory mark.” The individual accounts that have been discharged will remain on your report as “discharged” or “involved in bankruptcy” with a $0 balance. They should disappear from your report seven years from either the date of filing or from the original date of delinquency, whichever is earlier.
A Chapter 13 bankruptcy will typically stay on your credit report for seven years after you complete your repayment plan. Like with a Chapter 7 filing, the individual accounts will disappear either seven years after discharge or the date of delinquency.
Building Credit During and After Bankruptcy
Even while the bankruptcy is listed on your credit report, you can start the process of building your credit back up. You may be able to get a new credit card as early as a few weeks after obtaining a Chapter 7 discharge, although the terms will be less favorable than before your bankruptcy–you can expect a lower limit and a higher interest rate for unpaid amounts. One step you can take to start building your credit is to get a new credit card, use it sparingly, and pay it off completely every month. This practice allows you to start establishing credit without incurring any interest.
You could also obtain a secured credit card right after obtaining a bankruptcy discharge. A secured credit card is a card taken out against an account in which you deposit funds. Your credit line will be somewhere between 50% and 100% of the deposit. You can earn interest on the deposit, and you will immediately start building credit without taking on as much risk. There are likely annual fees, however, so be wary before signing on. You may also be able to sign on as an authorized user on someone else’s credit card. As long as they have good credit and continue to pay the card off each month, and you do not use the card, you get the benefit of their good habits.
Additionally, you are still eligible to obtain a personal loan, such as a car loan, after filing for bankruptcy. In fact, some lenders see Chapter 7 bankruptcy filers more favorably than people who are in the thick of debt before filing–suddenly, you will have a zero debt-to-income ratio. Chapter 13 filers will benefit from a reduced debt-to-income ratio. Chapter 13 filers also must obtain trustee approval before taking on new debt. Taking out a new loan soon after filing may not be the best option, but if it is something that you need (for example, because your car breaks down), it is an option. Your interest rate will be higher than if you wait until later on when your credit is stronger.
Maintain Good Habits
Whatever new debt you do incur, make sure to pay your bills each month. Take care to establish a budget that reflects your new financial situation, and do not go above it. A typical budget may separate your expenses into fixed (rent, car payments, etc.), variable (food, entertainment, utilities, gas), and irregular (quarterly insurance, medical expenses, gifts, etc.). The better you plan, the easier it is to stick to a good plan.
Try to set aside at least a portion of each paycheck for a savings account. You can even set up a savings account that will automatically take a portion of your checking account every month, and you can set it up, so the savings account is more inconvenient to access. Staying on top of your finances will ensure that you do not sink back into any debt issues and will help you build your credit back up.
Watch Your Credit Reports
As we discussed, bankruptcy does not stay on your credit report forever, and it should not. Credit reporting agencies are not perfect, however. To ensure that your credit report is not affected for longer than necessary, be sure to check your credit report on the dates you expect individual accounts and the bankruptcy to fall off. Individual accounts that were discharged in bankruptcy are set to disappear seven years from your original date of delinquency. In practice, it will take the credit reporting agencies a few months to reflect the changes. If those accounts or your derogatory mark are still on your report several months after the relevant seven- or ten-year point, contact the credit reporting agency to inform them of the error.
Effective and Compassionate Help With Your Florida Debt Relief Efforts
If you are considering bankruptcy, or if you have already been through bankruptcy and are looking to rebuild your credit, our knowledgeable and talented Jacksonville bankruptcy attorneys are here to help. We offer free consultations for bankruptcy clients. The bankruptcy legal team at Albaugh Law Firm is ready to review your financial situation, evaluate your options for debt relief, and work with you toward the best solution for you and your family. Call our Florida bankruptcy attorneys at 904-471-3434 today for a free consultation and case evaluation.