How Bankruptcy Affects Your Credit Score

The thought of losing one’s credit cards is a terrifying idea for some that are struggling with debt.  In fact, such a fear prevents many people from actually filing for bankruptcy.  The big fear is that bankruptcy will haunt them for life and prevent them from obtaining credit in the future.  Everyone dreams of purchasing a home or purchasing a vehicle.  Filing for bankruptcy and getting a fresh start will actually put someone in a greater position to obtain credit in the future.  As I always say to quote the band Genesis, “you’ve got to get in to get out.”  Thus, you must file in order to have a chance going forward.  The short conversation listed below is from the television show Legal Action which airs in the Chicago area on Comcast.

Interviewer: Dave, after you do a bankruptcy a lot of people are under the impression that’s the kind of – that’s the death blow.  I’m never going to get credit again.  Is it true?

David Siegel: No it’s not true at all.  It’s a common concern, that’s true, but it’s not true that there will be no more credit.  In fact, debtors are getting offers for credit immediately upon filing, because certain lenders and credit card issuers are sending solicitations to the filing list.  I’m talking about auto lenders, certain credit card that have high interest rates and annual fees, and different other entities that want to jump on this type of market for a couple of reasons.  First, it’s going to profitable for them, they’re going to be able to take advantage of people’s desire for credit, and their willingness to pay up for it.  Two, the lender understands that the debtor cannot file a Chapter 7 bankruptcy again for the next eight years.

Interviewer: So that makes them a good bet then.

David Siegel: Very good bet, because in the worst case scenario they can collect upon that debtor.  But what they really hope for is that the debtor pays the annual fee, manages the credit to the point where they’re paying high interest rates, and the credit card traps starts up once again.  So I tell clients all the time don’t be concerned about credit, don’t be concerned about your credit score, there is life after bankruptcy.  A pretty good life in that you’ve wiped out your debt, you’re going to get offers again.  Be cautious, be careful, don’t jump into the same bad habits that led you into bankruptcy in the first place.  I want to see clients get out of debt and not come back to me every eight years.  Unfortunately, though there are some that do come back every eight years, the mark the date on their calendar, they know when they can file, and they’re doing what got them in trouble in the first place and it’s a shame.

 

 

Call 1 (847) 520-8100ORFREE INITIAL CONSULTATION
  • AS SEEN ON:
AS SEEN ON: