Bankruptcy and Your Credit : Myths and Misconceptions

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BANKRUPTCY AND YOUR CREDIT
MYTHS AND MISCONCEPTIONS
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Filing the Petition Initial Drop
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There is no way around it your credit score
will drop when you file a petition for bankruptcy
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The extent to which it drops will depend on a
number of factors and there is no way to know
with certainty how much it will drop
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Generally, the higher your score to begin with
the more it drops
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An average decrease is 50-150 points BUT this
drop is only temporary
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Discharge in a Chapter 7 and Your Credit Score
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Debts are discharged at the end usually less
than 6 months
Debt to income ratio improves dramatically for
many debtors
Credit score goes up
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Re-Building Credit in a Chapter 13 Bankruptcy
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Debtor required to repay most debts over time in
a chapter 13
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Creditors must report you as paying on time if
you abide by the repayment plan
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Most debts left unpaid at the end of the
repayment plan period are discharged
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Credit improves over the course of the
repayment period
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Your Credit in the Long-Term
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Bankruptcy remains on your report for 10 years
for chapter 7 and 7 years for all others
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Bankruptcy will impact your credit rating but
doesnt have to be negative
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Many debtors can finance vehicle shortly after
discharge in chapter 7 or even during a chapter
13 repayment period
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If you filed a chapter 7 bankruptcy you will
likely need to wait about two years before
applying for an FHA loan
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FHA rules allow a chapter 13 debtor to
potentially qualify for a mortgage if at least
one year of the repayment period has passed with
payments being made on time and the bankruptcy
court grants permission
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Improving Your Post-Bankruptcy Credit Score
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Ultimately, the impact bankruptcy has on your
credit score is in your hands
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Ways to improve your score include
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Pay your bills on time. Paying your bills on time
during and after the bankruptcy is the single
most important thing you can do to improve your
credit score
Re-establish credit. Although you may think
applying for credit again is a bad idea, you need
a credit history to have a good credit score. Be
smart and dont apply for more than one or two
loans/cards, but do start re-establishing your
credit history
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Keep accounts open. Some accounts were likely
closed during the bankruptcy. If accounts remain
open after discharge consider keeping them open.
The length of time you have had an account open
usually increases your credit score
Monitor your score. Keep an eye on your score and
be sure to correct any discrepancies. Make sure
that all accounts that were discharged through
bankruptcy show as paid or discharged
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Learn More About Credit Score in Ohio
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Click to visit thecolumbusbankruptcylawyer.com
Content provided by Best Legal Practices