The decision to declare bankruptcy is a difficult one. But it is often necessary for those facing overwhelming debt, giving them a chance at a fresh financial start. Bankruptcy can have consequences that affect your finances.
For more information about how bankruptcy can affect your financial future, how to rebuild your credit after filing for bankruptcy, and how a bankruptcy lawyer can help, contact Bashore Green Law Group today for a free consultation.
How Long Does Bankruptcy Affect You Financially?
Filing for bankruptcy can have wide-ranging consequences on your financial future, the specifics of which depend on which chapter you file under. The two most common types of bankruptcies are:
Chapter 7 bankruptcy
In Chapter 7 there is potential for the loss of non-exempt assets so that proceeds can be applied to pay creditors. In most Chapter 7 cases the debtor is able to exempt all of their assets and as such most Chapter 7 cases are “no-asset” cases.
Chapter 7 is on your credit report for 10 years. Normally a debtor can obtain credit cards and auto loans soon after bankruptcy albeit on less favorable terms than someone with good credit. A debtor normally must wait two years from discharge to qualify for a conventional loan without the assistance of a co-borrower with good credit.
Chapter 13 bankruptcy
Known as reorganization bankruptcy, Chapter 13 involves restructuring your debts and creating a plan to pay them off over a certain time rather than selling any of your assets. A Chapter 13 filing can remain on your credit report for up to seven years. As with Chapter 7, after the filing of a case, the debtor’s ability to access quality credit may be limited for the first year or two with the situation steadily improving as the debtor uses consumer credit and pays existing debts.
No matter which type of bankruptcy you choose, the relative impact on creditworthiness will be a function of how good the credit score is prior to the bankruptcy. If the credit score is already poor, then the effect will be minimal. Also, future creditworthiness may be of little import to some and of significant import to others.
Applying for Loans After Bankruptcy
The main thing to remember when applying for a loan after bankruptcy is that your credit score may be different than before. You will be able to find lenders who are willing to work with you. However, in some instances, a creditor will charge higher interest rates and/or require larger down payments.
It’s important to remember that bankruptcy will stay on your credit report for seven to 10 years. You will need to focus on rebuilding your credit during this time by making regular payments on time and keeping your balances low. During this time, a consumer is advised to be conservative and responsible with your credit card usage.
Another crucial factor to consider when applying for a loan after bankruptcy is the type of loan you are applying for. Most lenders are more likely to give out small credit cards, secured personal loans, and other types of smaller loans to people with “dinged” credit. If you are looking for a mortgage loan, you may need to wait until your credit score has improved.
How Can an Attorney Help?
The experienced bankruptcy attorneys at Bashore Green Law Group can help you understand the consequences of filing for bankruptcy, determine which chapter best suits your needs, and help you navigate the paperwork and court proceedings associated with the process.
The bankruptcy lawyers at Bashore Green understand that considering bankruptcy can be stressful for Michigan residents. We provide quality legal representation and helping our clients make the best decisions for their financial futures. Our attorneys will explain the consequences of filing for bankruptcy and work with you to explore options in your best interest.
We will answer any questions you have about the legal requirements of filing for bankruptcy, such as understanding credit scores, developing a repayment plan, and working with creditors. Learn more by visiting us online or calling 248-487-1887.