What happens to my credit report?

Did you know that filing a bankruptcy case does affect one’s credit report in a negative way?  Many debtors are under the belief that by filing bankruptcy, they will never ever be able to buy a house, car or anything else because they filed bankruptcy.  While filing bankruptcy is not going to produce a positive spin on a debtor’s credit history, nothing can be further from the truth.  Clients have shared with me the fact that they have taken a 200 point hit while others only 100 points.  However, even with the negative hits on their credit scores, many of my clients have been able to purchase a home, a car or anything else on credit within a reasonable time after they have received a discharge in their bankruptcy case.  One client advised that after only one year of getting his Chapter 7 discharge, he was able to purchase a home at a reasonable interest rate.

Credit reports are basically a history of how well a debtor has paid on his overall debt load.  That is to say, how often the debtor was on time or late with payments.  When a debtor elects to file, their reports will usually show that they have missed payments more often than they have paid on time.   If a debtor files Chapter 13 and pays into his plan on a regular basis, his credit history may begin to show some improvement, while on the other hand, the filing of a Chapter 7 case may not show such improvement.  Recovery from a Chapter 7 case may take more time and the debtor may have to be pro-active in re-establishing his credit worthiness, but it can be done.  The main thing that debtors need to remember after a bankruptcy has been completed is to make sure that all future payments on any debt they retain are made timely.  This simple act will help the debtor to become, once again, a good credit risk.

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