benefits of chapter 7

Downside Of Filing Bankruptcy

Clients routinely ask “What is the downside of filing bankruptcy?” While there certainly is a downside to filing bankruptcy, a thorough review of most clients’ financial situation reveals that a bankruptcy is the right financial move for them. This article will the downside of filing bankruptcy, but also help to put it in context. As a Charlotte bankruptcy attorney, my goal is to help you decide what’s best for you and your family.

Effect of Bankruptcy On Your Credit Score

Bankruptcy will no doubt affect your credit score. However, this is usually only a concern for those with perfect a perfect credit score coming into a bankruptcy. That situation is rare. More often, a client’s credit score is already low due to late payments, missed payments, repossessions, foreclosures, or other financial issues.

The good news is that for most individuals, your credit score one year after filing bankruptcy will be as good as it was on the day you filed. In other words, one year after filing, your credit score has already recovered and you no longer have the debt issues you had prior to filing. From there, it’s easy to re-build your credit if you’re intentional about it. Our firm always offers tips on rebuilding credit after bankruptcy, and they do make a difference.

Effect of Bankruptcy On Credit Cards

When you file bankruptcy, you can’t keep “a few credit cards”. All of your credit cards will be cancelled upon filing. The good news is you’re no longer living on credit cards. A common question arises regarding having a credit card for emergency purposes. Most clients report to us that credit card companies offer them credit soon after they receive their discharge in bankruptcy. The reason is the bankruptcy filing improved your Debt To Income ratio and made you a great candidate for credit cards. Additionally, creditors like extending credit to individuals who recently filed bankruptcy because they know you’re more likely to repay the debt. After all, you can’t file bankruptcy again for a long time.

Effect of Bankruptcy On Getting A Mortgage

It’s true, you won’t be able to obtain a mortgage for two to four years after bankruptcy. However, you have to ask yourself if you could obtain a mortgage with your current credit score and debt situation. Most clients can’t. So while the intention to purchase a home is a good one, filing the bankruptcy is actually the first step in the right direction. During the two year waiting period, you can save for a down payment or pay down student loans, or contribute to your 401k. You won’t fall behind by filing bankruptcy.

Not All Debt

Bankruptcy does not discharge all debt. Some debt takes priority and survives a Chapter 7 or needs to be paid in full in a Chapter 13. For instance, Child Support, Recent Taxes (less than 3 years old), Mortgage Arrears, and Student Loans. Clients report that by filing bankruptcy and eliminating credit card debt and medical debt, as well as other types of debt, it enables them to focus on re-paying the types of debt which do not go away with a bankruptcy filing.

Speak With An Attorney Today

We know deciding to file bankruptcy is an important choice. We tell some clients it’s not a good choice for them. We’re happy to hear your story and help you decide. We know you have choices. We hope you choose to Recover With Us. If you’d like to speak with an attorney today, call 704.749.7747 or click for a FREE BANKRUPTCY CONSULTATION and we’ll give you a call or reply to your email.