Many individuals filing for bankruptcy are curious as to how filing will impact his/her credit and when he/she will be able to begin improving their credit after filing. The answer is that it depends. The impact to a particular individual’s credit score largely can be impacted by a number of things. If the debtor has already missed payments or made incomplete payments there he/she may already have poor credit. Filing for bankruptcy may impact the score negatively some, but in some cases, filing for bankruptcy can actually improve credit if the credit is already poor. Filing for bankruptcy may improve an individual’s debt to income ratio and will stop any further reporting of late or missed payments. It is important to remember that filing for bankruptcy is a one-time hit to the debtor’s credit, where missed or late payments continue to impact the credit score every month.
For some debtors, particularly those who are current on payments, the impact to the individual credit score may be more substantial. In this case, the debtor may be considering whether it is worth it to file. Chances are, if the individual is struggling enough to consider bankruptcy is it probably worth the temporary setback to the credit score. Further, if the debtor is struggling he/she may fall behind in payments later and the damage could be even worse.
Once a debtor have has filed his/her bankruptcy the available options for rebuilding credit largely depend on the type of case and the creditor. If the debtor filed a Chapter 7 he/she may incur new debt immediately after filing if he/she would like as none of his/her post-petition debts would be discharged in bankruptcy. An attorney may be able to make recommendations specific to the debtor’s needs, i.e. a vehicle. If a debtor filed a Chapter 13 case and need to incur debt for some reason he/she will need to first obtain permission from the court. This is something the debtor should consult with an attorney about and the attorney will need information concerning the nature of the debt and the obligation to repay. It is imperative that a debtor does not incur new debt while in a Chapter 13 case without permission of the court.
If you have questions about how bankruptcy will impact your credit, or would like to schedule a free consultation with no obligation, contact a St. Louis Bankruptcy Attorney Today.