Will I be able to buy a home again after declaring bankruptcy?
Many potential bankruptcy filers are understandably concerned about how filing for bankruptcy may affect their credit. There is a common misconception that declaring bankruptcy will tank your credit score for decades to come. In reality, while a Chapter 7 bankruptcy will impact your credit score, there are steps you can take to rebuild your credit soon after bankruptcy. It is quite possible to buy a home, purchase a car, and open a credit card within a few years of filing for bankruptcy.
The Immediate Impact of Filing for Bankruptcy
Immediately following your filing for Chapter 7 bankruptcy, your credit score will drop. The exact drop will depend on several factors, including your starting credit score. If your credit was stellar before filing, it might take a drastic drop. For the majority of filers, whose credit is already suffering, their scores will drop, but not as significant as the strong credit score filers.
Most bankruptcy filers already have poor credit. When you are past due on your bills, your credit will take a constant hit with each missed payment. Filing for bankruptcy will put a halt to the hits on your credit by freezing all collection efforts. In this manner, filing for bankruptcy will in effect allow you to refresh your credit.
Rebuilding Your Credit After Bankruptcy
A Chapter 7 bankruptcy will remain on your credit report for ten years, but it will rarely have an impact on your ability to use your credit for this long. The more time passes, the less the bankruptcy on your credit will be relevant to lenders. Even further, there are steps you can take to rebuild your credit. You should start by obtaining a copy of your credit report so you know your current credit status.
With knowledge of your credit score, you will then be able to make a plan to rebuild your credit. You will need to create a budget and stick to it so that you do not end up in debt again. Consider taking out a secured loan or credit card so that you can start rebuilding positive credit. Keep the loan or amount you charge to the card low so that you do not end up late on payments. Contact a bankruptcy lawyer for more help with filing for Chapter 7 bankruptcy.