People contemplating bankruptcy filing are often worried about how it will affect their credit score. However, if your credit is already underwater, bankruptcy would not significantly affect it. In fact, it may help you improve it in the long run. People with good credit scores might see a huge drop in the same after filing for bankruptcy. Though the bankruptcy chapter does not make much difference in your credit score, some creditors might consider you a better credit risk if you filed for bankruptcy under chapter 13. This is because you repaid some of your debts through the repayment plan involved in chapter 13 bankruptcy.
While bankruptcy does not improve the credit score immediately, it can be helpful, especially if you are behind any debt payment. This is because it gets rid of many types of debts, thereby reducing your financial load and allowing you to get a fresh financial start. Since this reduces your debt-to-income ratio, rebuilding your credit becomes easy. The key to improving your finances is filing for bankruptcy when things are going out of hand. Consulting an attorney at this time can help you weigh your options. To know more about bankruptcy discharge in Los Angeles, call 888-297-6203.
Can bankruptcy filers get loans or credit after filing?
If you file for bankruptcy, it appears on your credit report. In the case of Chapter 7, it stays for up to 10 years, while this duration is 7 years for chapter 13. Most credit scoring companies use your outstanding debt, payment history, length of your credit history, and the amount of credit you have applied for to compute your credit score. Once your bankruptcy is over, filers are often provided new offers for credit cards. This is because you cannot file for bankruptcy again till a stipulated time frame. However, such cards often have higher interest rates and should be avoided. Even car loans are possible after a bankruptcy discharge. Still, they too are available at a higher interest rate which will be unfavorable for you. You can be eligible for a mortgage after 2 years of completing a Chapter 7 bankruptcy. In the case of the chapter 13 plan, you might get it even before the repayment plan ends. However, this time frame is 4 and 2 years, respectively, for conventional loans. Rebuilding your credit is easy. You need to keep your debts low, especially compared to the available credit.