How Will Bankruptcy Affect My Ability to Get a Loan or Credit in the Future?

Getting into mountains of debt can be easy. Even if you try to keep your spending down, it seems like there is always something to worsen your money problems. Maybe your refrigerator stopped working, or your car broke down. You got injured, or your dog must go to the vet.

Life happens, and when it does, it can be stressful for your finances. That’s why many people opt for bankruptcy. It can help provide you with relief, giving you a second chance for financial freedom.

While bankruptcy can be beneficial, it comes with some cons that you need to understand. Because bankruptcy negatively impacts your credit score, it can affect your ability to get a loan, credit card, or other type of credit in the future. It will not be like this forever, but in the first few years following bankruptcy, you will face some challenges.

That is because bankruptcy will greatly impact your credit score. A bankruptcy can cause your credit score to drop by as many as 200 points. So, if your score was in the 700s, it could drop to the 500s, which is considered poor. Getting a loan will be difficult due to bankruptcy on your record as well as the huge drop in your credit score.

And yes, bankruptcy will stay on your credit report for a while. A Chapter 7 bankruptcy will remain on your credit reports for 10 years from the filing date. A Chapter 13 bankruptcy will affect your credit reports for seven years from the filing date.

Lenders will not offer you any credit until the debt has been discharged, and even then, getting any sort of credit can be difficult. The good news is that the negative impact will diminish over time. This is especially true if you actively work to rebuild your credit. It won’t happen overnight, though. It may take a few years, so be patient.

So, how do you rebuild your credit? You can start by getting a secured credit card, which is like a regular credit card but requires an upfront security deposit. If you keep your usage low and pay on time every month, you can improve your credit.

You can also consider a credit builder loan. This is an installment loan that works differently from other loans. It disburses your loan proceeds once you complete the repayment plan rather than upfront. Loan amounts go up to $1,000, and you may get up to 24 months to pay it back.

Contact Our Florida Bankruptcy Attorney Today

Bankruptcy is a great way to get out of debt, but it comes with some downsides that you need to be aware of. It will be harder to buy a car or home or even get a credit card.

If you are considering bankruptcy, Florida bankruptcy attorney Brian K. McMahon, P.A. will help you understand what to expect. Schedule a consultation with our office today by filling out the online form or calling (561) 658-1789. We serve the West Palm Beach, Boca Raton, Port St. Lucie, and South Florida areas.