Many people are afraid to file for bankruptcy because they know that it will hurt their credit score. However, the truth is that your credit score can recover much more quickly than you might think. The key is that there are many factors that influence your credit score, and bankruptcy is only one of those.
If you’re in a position where you have a lot of debt, are behind on payments, or have experienced foreclosure, repossession or collection actions, your credit score may already be in poor shape. Then, filing for bankruptcy won’t do nearly as much damage as it might have on a person who already had a good credit rating and minimal negative marks on their report.
The type of bankruptcy you file with Cain and Herren Hawaii also has an impact. Chapter 7 bankruptcy remains on your report for 10 years, while Chapter 13 stays for about seven years. However, the specific debts included in your bankruptcy are removed from your report sooner than that. This is because creditors are required to notify the credit bureaus when a debt is paid in full or discharged through bankruptcy. The credit bureaus then remove the account from your report.
Bankruptcy can be an option for individuals who are in financial trouble due to a job loss, medical emergency, divorce or the death of a primary income earner. If your disposable income is low enough compared to your debt obligations, you could qualify for Chapter 7. This is the form of bankruptcy that involves selling off non-exempt assets to pay off your debts. This includes your home, car and personal possessions like jewelry, art or stamp collections. The trustee who manages the bankruptcy process will decide which assets can be sold.
In some cases, you might be able to keep your home and car by completing a bankruptcy plan. However, this requires a court approval. In addition, you’ll have strict financial restrictions imposed on you. This can make it difficult or impossible to get credit cards and loans, especially during the early stages of your bankruptcy.
How Soon Can You Rebuild Your Credit?
The amount of time it takes to rebuild your credit after bankruptcy depends on how well you’re able to stick to your repayment schedule and show lenders that you’re responsible with money. To do this, you should pay your bills on time, check your credit report regularly for mistakes and work on a budget to reduce your expenses. Credit scores begin to improve about a year after bankruptcy, with most people seeing some improvement within 18 months. However, it can take a few more years to reach a good (670-799) or very good (740-799) credit score. This is because it typically takes longer to build a credit history for someone who has never had one before. Having an established relationship with a lender can help speed up the process. This is especially true if the lender is in your local community.
Cain & Herren, ALC
2141 W Vineyard St, Wailuku,
HI 96793, USA
+1 (808) 242 9350
cainandherren.com
