Credit Rating and Bankruptcy

: Reese Baker & Associates

  Filed under: Credit

When searching for solutions to overwhelming debt, people are hesitant about filing bankruptcy because of what it will do to their credit rating. It is scary to think that a bankruptcy can stay on your report for ten years.

While it is true, bankruptcy will remain on your credit report for ten years, adverse and default payments will stay on your report for seven years. Any number of financial problems can affect your credit score, over the limit balances, late payments, court judgments, and liens, foreclosures, evictions, repossessions, all can lower your rating and remain on your report.

Lenders

If a lender sees a bankruptcy on your report there are a few options they can take:

  • Deny you
  • Offer you the credit but at a higher interest rate
  • See that you have been paying your debt on time in the years after your bankruptcy and give you a chance

Some lenders actually seek out those in financial distress and offer them credit with a high-interest rate and extended payments. These are the “No Credit, Bad Credit, No Problem” types of lenders. 

Bankruptcy

Some of the benefits of filing bankruptcy are that all of your qualifying debt will be eliminated. If the judgments and liens are attached to exempt property, those will be wiped out also. Bankruptcy can stop wage garnishments, foreclosures, utility shut-offs, and repossessions. So yes, it will stay on your report, but unlike ignoring your debt and hoping it will go away, bankruptcy legally absolves you from having to pay the qualifying debt. 

New Credit

Although it is not a good idea to try to obtain credit just after your bankruptcy case closes, there will be a time when you will want to make a large purchase. If you show the lender that you can pay your bills on time and do not have a large amount of debt, you will not have to wait the full ten years to get favorable interest rates on a loan.

If you are overwhelmed in debt and would like a fresh start, contact a Rio Grande bankruptcy attorney to find out what bankruptcy can do for you.