Who Can Help Me Decide If Bankruptcy Is Right For Me
A Licensed Insolvency Trustee is the only professional licensed and authorized to administrate a bankruptcy filing on your behalf.
They are the most qualified to help you understand your financial situation and the different debt relief strategies that are available to you, fromdebt consolidationto bankruptcy, and everything in between.
Your first meeting with an LIT is free. During your consultation, your LIT will be able to provide a full debt assessment, an explanation of each option and their recommendation for your best step forward. The initial consultation usually lasts about one hour, and you are under no obligation to pursue any of our services.
Going through something like filing bankruptcy can be scary, humiliating and so overwhelming, but Adam set our minds at ease. He explained everything in detail and ensured we were aware of all potential options. When it came time to proceed, he helped us make an informed decision, answered all our questions, ensured we were 100 per cent comfortable with our decision and all potential outcomes before proceeding with filing.
M.G., Newfoundland
How To Build Credit After Bankruptcy
You can start rebuilding your credit score after the bankruptcy stay stops creditors from taking action. Bankruptcy will show on your record for 7-10 years, but every year you work to improve your credit, the less it will affect you and the financing you seek.
You need to wait 30 days after you receive the final discharge. This means most of your accounts will be at a zero balance, and creditors must stop calling you about debts.
To rebuild your credit score, you should:
What Do I Have To Prove
How financially self-sufficient you are can be factored into determining whether your application for citizenship or other government benefits is approved. Filing for bankruptcy does not automatically mean that you arenât financially self-sufficient.
In addition to showing that you are in one way or another self-sufficient, you must also show that you have âgood moral characterâ to be eligible for citizenship or other government benefits. Financial circumstances alone do not determine moral character, and the act of filing for bankruptcy does not automatically disqualify you from being able to prove good moral character.
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Is Your Credit Rating Really Worth Stressing About
Are you current on all your debt payments? Yes? No? Maybe?
If youâre behind on any debt payments, your credit score could probably be better. So, rather than worrying about possibly making your already bad credit worse, think about how a bankruptcy discharge could help you build credit.
So, what happens to my credit score if I file bankruptcy?
Like all negative information reported to the credit credit bureaus, filing any type of bankruptcy will have a negative impact on your credit score. Since a bankruptcy filing is public record, they will find out, even if theyâre not directly notified by the bankruptcy court.
But, unlike other things that have a negative effect on your FICO score, a bankruptcy filing is often the first step to building a good credit score.
What Happens To Your Income
Throughout the bankruptcy process, you will be required to submit monthly revenue and expense reports to your LIT.
If you have surplus income, your bankruptcy term may need to be extended up to 36 months. However, if your income increases during your bankruptcy you may find a new job while you are bankruptcy your term wont necessarily increase. Your monthly income is based on your average monthly income, as opposed to income month over month.
Youwill also need to provide yourLITwith the appropriate information so they can file tax returns on your behalf.
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Does Bankruptcy Create Bad Credit
One of the reasons bankruptcy hurts your credit is because youre not making payments like you normally would outside of an active bankruptcy. Payment history is the biggest determining factor of your credit score. Once you declare bankruptcy, youre saying you cant repay your loans in the way you originally agreed to or that you can only pay a portion of what you owe to your creditors through bankruptcy.
Another reason why bankruptcy hurts your credit is that filing for bankruptcy and attempting to wipe away your debts tells the credit scoring models that you were unable to handle the debt you took on. However, there are many reasons why someone may need to file bankruptcy such as a sudden job loss, medical emergency, divorce, or other unexpected life events. No matter the underlying reason you decide to file bankruptcy, it can still cause a lot of damage.
And, it should be considered a last resort if you cant repay your debts.
The damage that happens to your credit score after you file for bankruptcy depends on the state of your credit before you file. If your credit score wasnt great before filing, then you may only see a modest drop in points. But if your credit score was in good shape, then you may see a steeper drop in your credit score.
What Are The Different Kinds Of Personal Bankruptcy
Once youve decided to file for bankruptcy, you need to decide whether to file for Chapter 13 or Chapter 7 bankruptcy.
A Chapter 13 bankruptcy is designed to let you keep your assets, while settling your debts with your creditors by negotiating a payment plan that lasts between 3 and 5 years.
At the end of the payment plan, your remaining debts are discharged, unless youve reaffirmed your secured debts and received the approval of your bankruptcy judge.
In a Chapter 7 bankruptcy, your assets are liquidated and used to repay your creditors. At the end of the process, all of your debts are discharged.
Liens against collateral used to secure debt, like car loans and home mortgages, will not be discharged, and that property can be repossessed or foreclosed on unless you continue to make payments or are able to reach a new agreement with your lender.
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Does Bankruptcy Wipe Your Credit Report Clean
Myth: All bankruptcy debts will be wiped clean from your credit report.
The truth: While bankruptcy may help you erase or pay off past debts, those accounts will not disappear from your credit report. All bankruptcy-related accounts will remain on your credit report and affect your credit score for up to seven years or as long as they normally would, though their impact will diminish over time.
Bankruptcy And Mortgage What Happens To Your Mortgage After Filing
How does bankruptcy affect mortgage? A major concern for many homeowners contemplating Chapter 7 or Chapter 13 bankruptcy in Houston is whether they will lose the roof over their heads as part of the bankruptcy process.
The good news is that your mortgage company cannot raise your interest rate or change other terms of your loan as punishment when you file for bankruptcy in Texas.
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Does Filing For Bankruptcy Hurt Your Credit Score
One morning, you spotted a cobweb, its gossamer strands gathering dust, resting in a ceiling corner above your bathtub. Armed with a dusting cloth, you perched on the edge of the tub in your sock feet, confident that your cat-like agility would see you through. Boy, were you wrong.
By the time your broken leg was fully mended, you were adrift in debt. There was no way you could catch up on your monthly bills, let alone make up for all the time you missed at work. Bankruptcy seems like the only way out, but will the decision to purge your debts ruin your ?
While it’s true that filing for bankruptcy damages your credit, the same can be said for not making timely payments on the debt you owe. In some cases, filing for bankruptcy will do less harm to your credit score than being months behind on your bills. Even so, a bankruptcy will negatively impact your credit score, causing it to fall by 100 points or more. And it will remain a hindrance for years to come.
A secured credit card, however, can be a good option. In exchange for a lump sum and an annual fee, you can be issued a secured credit card. Typically, the credit limit will equal the amount you’ve paid the card issuer. As you use the credit card and pay the bill on time, the issuer will report your activity to the credit bureau, which will help you establish good credit going forward. Store credit cards, although they usually have high interest rates, are another option post-bankruptcy .
Will I Be Able To Get Loans Or Credit After I File For Bankruptcy
Whether you can get loans or credit immediately after bankruptcy depends on what kind of credit you’re seeking.
Many bankruptcy filers are bombarded with credit card offers after the bankruptcy is over. Credit card companies know you can’t file again for several years , so they might be eager for your business. But bewarethe credit card offers will likely have very high interest rates, annual fees, and other high charges.
Car loans. Most likely you’ll be able to get a car loan right away. But you’ll be dealing with subprime lenders, which means high interest rates and other unfavorable loan terms.
Mortgages. How long it will take to qualify for a mortgage depends, in large part, on the mortgage lender. You might qualify for an FHA-insured mortgage even before you complete a Chapter 13 plan and two years after a Chapter 7. For conventional loans, if your lender sells its loans to Fannie Mae, for example, you’ll have to wait at least two years from the discharge date after a Chapter 13 bankruptcy and four years after a Chapter 7 bankruptcy discharge or dismissal date . If your lender doesn’t sell its loans to Fannie Mae, you might have to wait even longer.
These are minimum wait periodsit might take longer to qualify for a mortgage. Other factors that affect your qualification include your income, your debt load, how large your down payment will be, and more.
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To Remove A Bankruptcy From Your Credit Report Youll Need To Find Evidence That The Bankruptcy Was Reported Incorrectly Otherwise It Will Only Come Off After Seven Or 10 Years Depending On The Type Of Bankruptcy
Beyond the stress and inconvenience that comes with filing for bankruptcy, it can have a long-standing impact on your credit report and score.
Fortunately, that negative impact can be mitigated with the right help.
Revive Your Credit After Bankruptcy
If you decide to file bankruptcy, know that your credit isnt lost forever. Once youre out of bankruptcy and your finances are back on track, you can focus on rebuilding your credit score. That involves building a positive payment history with new creditors or with any accounts that survived the bankruptcy. You might be surprised to see how soon after bankruptcy you begin receiving credit card offers again.
Bankruptcy remains on your credit report for up to 10 years, but it impacts your credit less as time passes and as you add positive information to your credit report. Its possible to get to an excellent credit status after bankruptcy, but you have to get through the process first. If, of course, thats the best option. If you’re struggling with your debt payments, it may be in your best interests to temporarily forgo your credit score to get your finances back on track.
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Debt That Can’t Be Forgiven
While bankruptcy can eliminate a lot of debt, it can’t wipe the slate completely clean if you have certain types of unforgivable debt. Types of debt that bankruptcy can’t eliminate include:
- Most student loan debt .
- Court-ordered alimony.
- A federal tax lien for taxes owed to the U.S. government.
- Government fines or penalties.
Talk To A Financial Coach
You dont have to walk this alone. Read that again: You dont have to walk this alone. Get with a financial coach and talk about your situation. They arent here to judgetheyre here to help.
A financial coach can help you figure out a personalized plan of action for your specific situation. And yes, talking about money can be terrifying, but if you declare bankruptcy, your financial privacy will be out the window immediately. Opening up to a trustworthy financial coach now can help you avoid having to open up to a whole courtroom of people in bankruptcy.
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Monitoring Your Credit Report
Also, it’s essential to examine your credit report for mistakes after your discharge. If you notice an error, correct it promptly so that it doesn’t derail your efforts to rebuild your credit. You can check your credit report for free using annualcreditreport.com . You’re entitled to one free copy per year from each of the three reporting agencies. Requesting a report from one of the three agencies every four months is an excellent way to keep track of changes. Also, all of the three reporting agencies allow you to file a dispute online.
So Whats The Better Option Chapter 13 Or Chapter 7
That all depends on your particular situation. Obviously, the ideal answer is neither, but sometimes bankruptcy is unavoidable in the wake of medical emergencies or job loss. If you want to be able to keep all of your property, Chapter 13 might be your best bet, but there are cons to Chapter 13 bankruptcy as well. Chapter 7 has harsher consequences, but it might not deliver the financial relief you need.
You can also try to come up with a viable budget and stick to it. If you need help, there are nonprofit credit counseling agencies and debt management programs to get you back on track. They might be able to reduce interest rates and monthly payments to a level you can afford. Credit counseling is actually mandated with most bankruptcies, so you might as well get the treatment before you file.
If you stick to the debt management plan, you might not have to file for bankruptcy at all. Then the fear and mystery around filing for bankruptcy will vanish before it ever begins.
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You Can Improve Your Credit After Bankruptcy
Dont give up after youve filed for bankruptcyyou can improve your credit score. But be patient, because it could take some time. If you want a little extra help, sign up for our free , or consider ExtraCredit. Restore It, a feature on ExtraCredit, gives you an exclusive discount to one of the leaders in credit repair. They can help you work to get your score where you want it to be after youve filed for bankruptcy.
Here’s How Bankruptcies Impact Your Credit Score
While bankruptcies on your credit report will always get factored into your credit score for as long as they are on there, the impact on your score lessens with each year that passes. So, you may see a dramatic drop in your score in the first month immediately following your bankruptcy filing, but by the end of the first year it could have less weight, and certainly less in later years compared to year one.
Your own credit profile will also play a part in how much your credit score is affected when you declare bankruptcy. Similar to how having a higher credit score can ding your more points if you miss a credit card payment, so, too, is the case if you file for bankruptcy. According to FICO, someone with good credit may experience a bigger drop in their score when a bankruptcy appears on their report than someone with an already poor credit score.
Estimates we found online from places like Debt.org show how people with different credit scores would be impacted by a bankruptcy filing. Someone with a credit score of 780 or above would be dinged between 200 and 240 points, while someone with a 680 score would lose 130 to 150 points.
Whatever the case, no one really benefits from filing for bankruptcy. It’s an option of last resort that sometimes even those with good credit find themselves making.
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