Bankruptcy is a process by which you go to court and have eligible debts discharged. Because you do not pay back the money that you owe, this can have an adverse impact on your credit rating. The bankruptcy judgment will show on your credit report for between seven and 10 years.
However, while bankruptcy can affect your credit score, it does not necessarily make it impossible for you to take on loans or borrow money. In fact, in many cases, bankruptcy can actually be the first step towards improving your credit and getting back on track to be able to borrow money at favorable rates.
If you are struggling with debt, you should not let concern about your credit prevent you from taking the smart step and filing for bankruptcy. An experienced Long Island bankruptcy lawyer at the Law Office of Ronald D. Weiss, PC can help you to take legal action to find relief from your money troubles.
Bankruptcy and Your Credit
There are many different factors that go into determining what your credit score is. The formula used to assess your credit takes into account:
Payment history is the most important consideration in arriving at your score and bankruptcy affects this aspect of your credit report. However, when you are facing debt trouble and you are late paying credit cards month after month, this also affects your payment history and lowers your score. Likewise, when you’re drowning in debt, your maxed our credit cards and charge-offs from debts you don’t pay will bring down your credit rating as well.
All of these negatives go away when you file for bankruptcy. You will no longer have late payments month after month, and you will not have high balances on your accounts that frighten lenders. You can start to improve your credit instead of having it get worse as more negative information is continually posted by lenders that you cannot pay.
Your Credit After Bankruptcy
After your bankruptcy filing, you should be able to get a secured credit card within a few weeks or a few months. The card is likely to be expensive, have high fees and have a high interest rate. However, you don’t need to carry a balance on your secured card.
Be sure that the card issuer reports to the credit reporting agencies, and use the secured card to make small purchases that you pay off in full and on-time. As you pay your bills each month, you’ll build up a positive credit history and your score should start to go up.
To get started on this path towards getting rid of your debt and improving your credit, contact a Long Island bankruptcy lawyer at the Law Office of Ronald D. Weiss, P.C. today.
To learn more, please download our free bankruptcy in New York report here.