San Marcos Credit Rebuilding Attorney
There is a pervasive myth that filing for bankruptcy will permanently ruin your credit. Many people do not realize that bankruptcy can actually improve your credit in the long run.
At North County Bankruptcy Clinic, we take a holistic approach to every case. We are invested in our clients’ futures and rely on our over 40 years of experience to help them take steps to restore their creditworthiness post-bankruptcy. Every case is different, but several historically reliable strategies are often available. Our San Marcos credit rebuilding lawyer has even represented clients who have been able to purchase homes within two or three years after discharge from bankruptcy. We will provide you with the personalized attention your situation demands and do everything possible to efficiently improve your credit score.
How Filing for Bankruptcy Can (Eventually) Improve Your Credit
There is no getting around the fact that filing for bankruptcy will initially hurt your credit. A Chapter 7 bankruptcy will stay on your credit report for up to ten years, while a Chapter 13 filing will remain for seven years. However, bankruptcy facilitates powerful relief and can help you eliminate debt that may be doing greater overall harm to your creditworthiness.
Remember, the longer debts go unaddressed, the more they can hurt your credit. Your credit will take an initial hit when a creditor reports a delinquency to the credit bureaus. When your debt enters default, it may get passed to collection agencies, which tend to be far more aggressive in pursuing adverse actions. A debt collection lawsuit can devastate your credit score and result in your losing a portion of your paycheck to wage garnishments.
When you file for Chapter 7 or Chapter 13 bankruptcy, you temporarily stop all collection actions, including pending lawsuits. Completing either process generally entitles you to a discharge of unsecured debts, including credit card debt, medical debt, personal loans, and unpaid utility bills. These debts will no longer be able to hurt your credit. Bankruptcy can also give you the resources you need to catch up on secured debts, such as your mortgage.
In other words, filing for bankruptcy can stop the bleeding caused by crushing debt and provide you with a fresh start. Our San Marcos credit rebuilding attorney can advise whether you are a good candidate for bankruptcy. Our team at North County Bankruptcy Clinic can also help you explore bankruptcy alternatives.
There are several steps you can take to immediately start rebuilding your credit after you file for bankruptcy. First, you should get a copy of your current credit reports and check them for errors. You have the right to dispute inaccuracies, and doing so can remove damaging items that are weighing down your score.
Each case will require a different approach, but it is often beneficial to consider:
- Obtaining a secured credit card. Unlike an unsecured credit card, these cards are backed by the funds you deposit. You can carefully use this card to make routine purchases and improve your credit over time.
- Procuring a credit-builder loan or secured loan. Many credit unions and community banks offer these conditional types of loans. A credit-builder loan involves placing loaned funds in a savings account that is only released to you once you have made all required payments. When you take out a secured loan, you borrow against money already on deposit at the institution. Making payments on either of these loan types can substantially help your credit.
- Applying for an unsecured credit card or loan with a cosigner. You will need to ask a trusted person with good credit to cosign for you. A cosigner’s credit will suffer if you do not make payments, so you will have to convince the prospective cosigner that you are reliable and financially capable.
Repairing your credit score post-bankruptcy will often involve getting three forms of credit. You will also need to budget carefully, spend wisely, and always make payments on time. Our San Marcos credit rebuilding lawyer can help you develop a strategy tailored to your unique needs.