For many, bankruptcy can take a significant weight off their shoulders. Not only do you feel relief as creditors can no longer contact you, but you may feel like you have reclaimed your finances. However, many are unprepared for the impact that filing for bankruptcy can have on their credit. If you have recently filed, understanding what you can do to rebuild credit is critical. Luckily, the following blog explores what you should know about this process and why it’s in your best interest to connect with a Memphis, TN consumer bankruptcy lawyer as soon as possible when you are ready to begin your bankruptcy case.
How Does Bankruptcy Impact Credit?
When you are considering filing for bankruptcy, understanding the impact it can have on your credit is critical. Generally, your credit score will drop drastically when you file, and it can remain on your credit report for several years. Filing for Chapter 7 will stay for ten years, while filing for Chapter 13 will remain for seven.
It’s also essential to understand the better your credit score is, the more drastic the impact will be. If you have an “excellent” or “good” score, filing can drop your score around 200 points. In the lower ranges, you can see your score fall by 150 points.
What Can I Do to Rebuild Credit?
After filing for bankruptcy, it’s necessary to understand what you can do to improve your credit score. Generally, the most important thing you can do is set a strict budget. When you make purchases you cannot afford or run up credit cards to accumulate debt while recovering from bankruptcy, it can reverse the progress you’ve made, hurting your score again.
Additionally, you should consider opening a new account. While it can be challenging to get approved for a new credit line following bankruptcy, you may be able to obtain a credit builder loan, which is specifically designed to help people improve their credit scores. You may also ask someone to co-sign a loan, but beware, they may not feel comfortable doing so, as they can be held liable if you do not make payments when necessary.
Finally, you’ll want to ensure you make on-time payments. Many underestimate the impact this can have on their score, not realizing that making on-time payments accounts for a considerable portion of your credit score. As such, avoiding late payments can help you bring your credit score back up.
Should I Connect With a Bankruptcy Attorney?
If you are interested in filing for bankruptcy, the importance of working with an attorney cannot be stressed enough. This is a complex legal process in which your financial future is on the line. As such, connecting with a lawyer can help ensure the process goes as smoothly as possible and you have someone well-versed in these matters to ask questions and provide advice to help you rebuild your credit based on your circumstances.
When you are ready to declare bankruptcy, it’s in your best interest to connect with an experienced attorney from the Arnold Law Firm as soon as possible. Our dedicated legal team understands how complex this process can be, which is why we are proud to help the people of Tennessee through these challenging times. Connect with us today to learn how we can help guide you.
