HOW IS MY CREDIT AFFECTED?

Bankruptcy is like a knife. One side is sharp and the other side is smooth. Bankruptcy can leave a negative mark on your credit score but the other side to filing bankruptcy is that once you have completed your case you are DEBT FREE. You decide which is better or worse. I offer a FREE Consultation to allow you the chance to explore all of your options. All you have to do is call 210-930-7000 to schedule an appointment so that you know how bankruptcy can help you.

A bankruptcy case is designed to help debtors’ get control of their financial situation without adding to the pile. Through bankruptcy, we are able to stop all negative reporting on your credit report. This means, creditors are not able to continue reporting late payments, missed payments, and over limit balances. Additionally, the creditors are not able to continue charging you the fees associated with those missed payments, over-limits, late fees, and high interest. Because of bankruptcy, all of the negative activity will stop, allowing you time to repayment your debt and/or receive a discharge order from the court.

Just a little more information:

You must understand that any reported event that occurs pertaining to how you have paid your debts will show up on your credit report.  An event remains on your credit report for 7 years.  A Chapter 13 bankruptcy will show up on your credit report for 7 years, whereas a Chapter 7 bankruptcy will show up for 10 years.  The next thing that you must understand is that good credit is paying what you owe, when it is due.  Anything else is less than good.  If you are in financial difficulty, for whatever reason, the chances are that your credit report is already bad or soon will be bad.  Since your credit report is probably already substantially impaired, the filing of a bankruptcy case may be the best thing or the only thing that you can do to begin to reestablish your good credit. 

Another point you should consider is credit worthiness rather than your credit history.  A lender determines your credit worthiness at the time that you apply for credit.  Many people mistakenly believe that their credit report is the only determining factor in this process.  Instead, a lender will look at (1) your income; (2) your monthly living expenses; (3) the ratio of your income to the proposed monthly payment in order to determine how much of your income it takes to pay the proposed monthly payment; (4) your total debt; and (5) your payment history on your debts.  Your credit report typically provides information as to items 4 and 5 only.  Most people that have a hard time paying their bills would have difficulty showing that they have enough money coming in each month to pay on an additional debt, regardless of what their credit report says.  If a lender determines that you do not have enough money to make the proposed monthly payment on the new debt, then you will not be able to get that new debt.  Thus, the biggest problem for most people that have a hard time paying their bills is not what their credit report shows, but how much money they have left over each month after all their monthly expenses are paid.  You can increase your credit worthiness by first reducing or eliminating your debt, which should reduce your monthly expenses.  Next you can increase your credit worthiness by increasing your income so that you have money left over at the end of each month.  Next, establish a record of on-time payments to creditors for a period of 12 to 24 months.    

Another point you should consider is the misconception that a bankruptcy on your credit report will prevent you from getting any credit.  Look in your newspaper and you will likely see ads stating that offer financing to those persons with credit problems.  Although everyone’s situation is different, many of our clients get offers of credit after their bankruptcy case is over.  We have received in our office several pre-approved credit card offers for clients that have received a discharge in bankruptcy.  Another example of how a bankruptcy can help someone’s financial situation is shown by a former member of our staff.  Less than two years after she filed a Chapter 7 bankruptcy, she and her husband were able to purchase a vehicle and a house using credit.  There was one downside – the interest rate on her vehicle was 14%, but she was able to get that loan refinanced to a market interest rate after 6 months of on-time payments.  A more recent example comes from one of our clients who obtained credit approval for the purchase of a house at 6.5% interest, due in part to his ability to show 24 months of on-time payments to creditors after the bankruptcy discharge that was issued 2 years earlier.  There was one downside – our client had to shop around for lenders, and it was the third lender that approved him for the credit.

In San Antonio, there is a credit rehabilitation program that is operated by the Chapter 13 trustee for the benefit of those persons that complete their Chapter 13 plan and they have repaid approximately 75% of their debts.  If you complete your Chapter 13 plan in such a manner, and you have a need for credit, the Chapter 13 trustee can provide requested information to lenders that participate in the program.  Basically, it means that substantial creditors will consider your credit application as though you had never filed bankruptcy and are debt free.  

So, as we tell many of our clients, the filing of a bankruptcy will show up on your credit report, but the good thing is that it will show up on your credit report.  It will discharge most, if not all, of your debt, and for many people it is a big step toward improving their credit worthiness.         

 

Allow me the opportunity to go over your situation with you, and you will find the information I provide to be useful in your future decision making.

Don’t make your situation worse by waiting.

Call 210-930-7000 today to schedule your Free Initial Consultation.