What's The Real Impact Of Bankruptcy

Bankruptcy doesn’t have to be final or fatal, in fact it can be a brand new start. Whether you file for Chapter 7 or Chapter 13 you’ll have the same opportunity to get a better handle on your finances. A Chapter 13 Bankruptcy will usually stay on your credit report for seven years, whereas a Chapter 7 Bankruptcy will stay on your credit report for ten years. Many folks often fear that bankruptcy is insurmountable but nothing could be further from the truth. The impact of a bankruptcy on your credit score will dramatically reduce after three years have passed. But you don’t have to wait for three years to start rebuilding your credit score.

Right after a Chapter 7 Bankruptcy is discharged, credit card offers will start flooding your inbox. Unfortunately, most people freeze and swear off credit cards forever. But this is the time to start rebuilding credit.

Disclaimer:Keep in mind that the credit card offers right after bankruptcy will come from tier 3 banks and these should be avoided. Banks are rated on a tier system and credit scores are impacted by the credit cards you have. In other words a credit card from Chase will factor better on your credit report than a credit card from Capital One (this bank is notorious for lending to people with subpar credit). Your best bet is to open up an account at a credit union and starting with a secured line of credit or a secured credit card. After one year of making punctual payments the status will change from “secured” to “unsecured” and the boost to your credit report will be substantial. If you are able to find a couple of credit unions in your area that offer “secured” lines of credit, you could do this two or three times.

For example, if credit union #1 offers you a secured line of credit in the amount of $1,000, you would deposit $1,000 to secure the loan and they would give you a check for that $1,000. You would then take that check for $1,000 and you’d go to another credit union and deposit that check as a security on another line of credit, and you would repeat the process a third time. You’d pay the interest on the loans, but after one year you’d have three top quality tradelines on your credit report. Credit Union loans score nicely on credit reports.

The credit card offers won’t flood your inbox when you file a Chapter 13 because you will still have debt, but this is still the best time to start rebuilding your credit. A secured credit line or secured credit card from your credit union will prove to be very beneficial to your score after the tradelines become unsecured.

Bankruptcy is not the end of the world, it’s just a learning process. The key is to start rebuilding credit as quickly as possible. Hundreds of thousands of people are able to obtain conventional mortgage loans within three years of filing for bankruptcy. Our Council experts will help you understand the bankruptcy process and they’ll teach you the right ways to start rebuilding credit in the fastest way possible.