Utah Bankruptcy Lawyer – Does Bankruptcy Affect Your Credit?
How Does Bankruptcy Affect Your Credit?
The general rule is that filing for bankruptcy will hurt your credit. All 3 of the major credit bureaus, Equifax, Experian, and Transunion, collect information every day from the United States Bankruptcy Courts. In the old days, I remember going to the Utah federal courthouse and you would see people going through the bankruptcy court listings and they would fax the information to the credit reporting agency. Later, people with laptop computers would come into the courthouse to data mine the information.
Now, the federal bankruptcy court has all of its filings online and the credit reporting agencies get that information directly from them.
So, the way the credit bureaus will report your bankruptcy is that it will simply indicate a bankruptcy filing. If you later have your bankruptcy case dismissed, the bankruptcy filing will still report on your credit reports.
If you file for a chapter 7 bankruptcy, it will stay on your credit report for 10 years. The general rule is that a debt will fall off of your credit report after 7 years; however this is not true for the chapter 7 bankruptcy case filing.
What will your credit score be after filing for bankruptcy?
Most people start off within 400s and 500 credit scores when they file for a chapter 7. This is because people have been waiting so long to take care of the debt situation, that they are usually behind on several bills and they may have even been sued. If that’s the case, then they will start off low and filing bankruptcy could actually improve their credit score. So, depending on your situation you could have a 600 plus credit score after filing, it just depends. Depending on the lender and what type of bankruptcy you filed, you may be able to buy a house the day after your bankruptcy case is concluded. You should also keep in mind that if you filed a chapter 13 case, the chapter 13 bankruptcy only stays on your credit for 7 years. I’ve previously explained a chapter 13 bankruptcy here and a chapter 7 bankruptcy here.
Just remember, even if your scores are in the 600 or even 700 range, if the bankruptcy is showing up on your credit report, it can still be taken into account and will cause your interest rate to be higher as a result, but the more you rebuild your credit, the better rates you are going to get. Additionally, the older the bankruptcy is on your credit report the better. This means the further back in time you filed, the less importance and weight the lender usually gives to it.
Watch this video for more information:
Just do your best not to get back into the same situation that you got into bankruptcy so it doesn’t happen again. Most of us know that huge medical bills, loss of employment and other issues can take a huge toll on you financially.
Lenders look at what they call the Universal Default Rate. Before you file for bankruptcy and you start defaulting on a loan, every other piece of credit that you have will switch from whatever interest rate you had to the Universal Default Rate for that line of credit…..which is almost always at least 30% higher than what you were paying. This is because lenders get scared and freak out because they don’t want to lose money. This happened all the time during the 2008 financial crises in the US. If this happens to you; then, the amount of money you owe will rise dramatically, making matters worse.
In the time that passes after you file for bankruptcy relief…you will still be able to get loans (yes even a mortgage after bankruptcy), but keep in mind that the interest rates will be higher as a result. Do your best to stay out of debt to avoid paying really high interest rates.
One way to improve your credit is to buy furniture from RC Willey after your bankruptcy case is concluded. RC Willey has the ability to set up a credit account for you and they will report positively on your credit so long as you stay current on your payments and make your payments on time.
If you have really high interest rates; that should make you to pay more in additional interest for years to come, which is why you should pay down debt and even pay off debt when you can.
The best thing to do after bankruptcy is to set up at least 1 to 2 new accounts and then to take it easy on credit for a while. Be sure you make timely and consistent payments because one mistake and it could be all over and back downhill.
Chapter 7 bankruptcy is the commonest denotation of bankruptcy. It stands for discharging or canceling of debts that you have incurred. As an individual, you can select between Chapter 13 or Chapter 7 bankruptcy. Selecting between the two is not easy. A good bankruptcy lawyer will review your specific circumstances before helping you to decide which type of bankruptcy is applicable to you.
Call us if you have any questions, we are standing by, ready to help you, so call Mike Anderson today at (801) 676-5506.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 876-5876
— Tim Cella (@TimCella2) October 20, 2022