bankruptcy and your credit

Will Filing Bankruptcy Ruin Your Credit?

I get this question a lot from potential clients.  My goal as bankruptcy attorney is to take any expectations about credit and beat them into the ground.  No one should expect to file bankruptcy and then immediately have a great credit score.  I don’t soft pedal bankruptcy and I shoot straight with my clients.

I am shocked that the people who are usually most concerned about how bankruptcy will impact their credit currently have terrible credit scores because of past judgments and delinquent accounts.  Judgement liens can be renewed by your creditors.  Creditors who are willing to garnish your paycheck will also come after your bank account.  If you ignore the problem, it won’t go away by itself.  I am shocked at how many people are willing to let their creditors pulverize them financially for years before finally seeking legal advice. Filing bankruptcy eliminates the underlying problem.  

It surprises me that I routinely see people who allow themselves to be garnished because they think they are protecting their credit rating.  In reality, their credit rating has already been hammered by the lawsuit and other collection actions.  Allowing old debt to hang over you forever is not going to raise your credit anytime soon. 

Filing bankruptcy allows many people to get a new start so that they can begin the process of rebuilding credit.  While it is true that a Chapter 7 will be on your credit report for 10 years, that does not mean you have to wait 10 years to re-establish your credit.  The process of rebuilding begins as soon as your case discharges which is typically 90 days after you file. 

Since you can file Chapter 7 only once every 8 years, a person must be extremely careful about accepting offers of credit after filing bankruptcy.  The world is full of unscrupulous creditors who love to lure people back into debt after coming out of a Chapter 7.       

Can you buy a car after filing bankruptcy?

The answer to this question is yes.  Buying a new car is going to depend on how much money you are putting down on it and your current employment situation.  In my 22 years of practice, I have seen many clients purchase a new car from a dealership within 6 months of filing.

Can you buy a house after Chapter 7 Bankruptcy?

I have seen many clients do it.  In most cases, it will be around two years after filing before you can buy house.  Again, the down payment and employment status will be crucial.  I have heard many mortgage experts say that as a general rule, you don’t ever want to buy a house until you can put down at least 10 percent of the purchase price.

Credit Score vs. Cash

Personally, I think people should be most concerned about establishing a cash emergency fund and not credit. Cash in your bank account is king.  Credit can be a highway to destruction.

In conclusion, saving cash every month and not credit is the real key to your financial success.  If you have any questions about bankruptcy, please call me at 770-881-8449. 

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