Persons and businesses contemplating filing for bankruptcy protection are often undergoing serious financial problems that have already, or will shortly in the future, appear on their credit reports. While a bankruptcy filing would also appear on a person’s credit report, the bankruptcy filing has the advantage of dealing with and potentially resolving some of the financial problems inherent in the situation. Therefore, after a bankruptcy filing, a person is often better situated to repay new creditors and in time can be a better credit risk than they were prior to the bankruptcy filing. Having regular income, paying bills on time after the bankruptcy case and making more of an effort to start small credit accounts that can register post-bankruptcy good credit information, all can help rebuild credit. Another method of rebuilding credit is credit repair, which is a service provided by our office, where erroneous or inaccurate information on the credit report makes it harder to rebuild credit.
Where persons are considering debt relief options, they are usually also very concerned about their overall credit, credit score and credit report, despite the actual credit problems they have faced. Realistically they realize that they need to improve their present economic situation in terms of the actual debt they owe before they can look at how it appears to others and how it is reported. However, when they assess options in terms of restoring credit, bankruptcy and/or creditor negotiations each seem to have advantages and disadvantages. what is clear, is that where the debt load is high and the capacity to quickly pay it off or settle all or most of it is low, it makes sense to consider bankruptcy options. Negotiation and settlement options are often not enough of a break in terms of what is really owed to ultimately help enough with appearances from the standpoint of credit improvement. Bankruptcy is a much greater option for resolving debt and rebuilding credit since it addresses and eliminates the actual problems: the overwhelming and underlying debt.
Any financial transactions in which you are engaged may affect your credit report. Most clients inquiring about bankruptcy already have many entries on their credit report which show that they are in financial hardship. Such entries have already affected the client’s credit and while the bankruptcy case will also indicate that the client had financial hardship, the bankruptcy case will also ease the situation by helping the client eliminate the debt that is the cause of such hardship. Essentially the client after having eliminating their overwhelming obligations in the bankruptcy case, can now concentrate on rebuilding their credit, which usually takes 6 months to 2 years. Although the notation that there was a bankruptcy filing will remain on the client’s credit report for 10 years, this is the same amount of time that any judgment would remain on the credit report. Therefore, the difference between judgments on your credit report and a bankruptcy filing on your credit report is that the bankruptcy filing says that you already eliminated your problematic debt obligations and that the financial hardship was in the past. A judgment, on the other hand, says that your debt obligation is ongoing, and that your situation may be too risky and uncertain for creditors to give you new credit.
The question is whether you have debt that is already in collections or is about to be in arrears? For most persons contemplating bankruptcy and/or other debt relief options the debt is already hard to manage and is either late or getting out of control. If so, a bankruptcy case, by eliminating or reorganizing problematic debt, can with time help you to restore your credit by eliminating the source of your financial hardship.
Maintaining good financial habits and practices post-bankruptcy can help a person more quickly rebuild their credit as follows:
A bankruptcy attorney can advise persons filing for bankruptcy protection as to the methods by which they can rebuild their credit rating.
Please call us at (631) 271-3737, or e-mail us at firstname.lastname@example.org for a free consultation to discuss such legal options in greater detail.