Will filing bankruptcy ruin my credit forever?

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No, it will not. Filing bankruptcy will impact your credit upon filing however, after a year of filing bankruptcy most debtors find their credit scores have increased on average 125 points from the date of filing. In today’s economy, bankruptcy has become a much more frequent occurrence and the consequences of filing have drastically decreased in their severity.  Normally, the only place that a bankruptcy can be viewed by a creditor is a credit report.  When a bankruptcy is filed, almost all of the debt on a credit report goes to zero while income stays the same. Thus, this improves the credit score, giving most bankruptcy filers a better credit score shortly after filing.

Today, those who file bankruptcy are able to obtain credit right after the bankruptcy process is complete (4 months in most circumstances). This includes obtaining new credit cards and car loans. However, the Annual Percentage Rate (APR) on these items may be high if they are obtained too soon. Therefore, an individual who files bankruptcy should spend about six months to a year raising their credit score to a point where the APR rises to a rate that is reasonable and similar to the rate obtained by the individual before the bankruptcy was filed.

An individual who files bankruptcy can increase his credit score almost immediately after the bankruptcy process is finished. This can be done by obtaining a secured credit card and using it like a regular credit card. In addition, any payments that are made to any reaffirmed debts (debts that are secured by a car or a house where a new contract is signed for these items during the bankruptcy) also count towards increasing the credit score of an individual bankruptcy filer. In most circumstances, bankruptcy is a new start for any individual who has come upon hard times.

From the author: Bellah Perez PLLC
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