Joliet Bankruptcy Attorney On Bankruptcy And Your Credit Rating

A common concern that I hear as a Joliet bankruptcy attorney is how filing under Chapter 13 affect a person’s credit rating.  Filing under Chapter 13 Bankruptcy is a bankruptcy case.  Much like a Chapter 7, Chapter 13 is bankruptcy, just under a different section of the bankruptcy code.  Since you are filing a bankruptcy case, it is going to be public record, it is going to hit your credit report, and it is going to affect your credit score.  

I see many clients on a weekly basis who tell me they have great credit but they’re carrying a ton of debt.  I advise these clients not to worry about the credit score, not to worry about getting credit again.  Worry about first getting out of debt, either under Chapter 7 or Chapter 13.  If you file a Chapter 13 bankruptcy case and you complete all of your payments, the credit bureau might reflect that you have paid off all or a portion of your debt.  Additionally, some lenders look more favorably on Chapter 13 than they do under Chapter 7.  The reason for this is, Chapter 13 is a repayment plan, so the creditors are paid either all or a portion of the debt that they’re owed.  Under Chapter 7, the debts are typically eliminated and discharged and the creditors do not get paid back.  

There will be a hit on your credit report for filing a bankruptcy.  Don’t think that your credit report is going to look perfectly clean after you file a bankruptcy, whether it be Chapter 7 or Chapter 13.  However, if you make the right step and file a Chapter 13 and complete your case, you are eventually going to get offers for credit, whether it be for mortgages, auto financing, or credit cards.  Most of my clients receive offers for credit before their case has even gone to completion.  This type of financing is known as open-bankruptcy financing, and it is very common these days. 

I caution my clients about getting credit after their bankruptcy case is filed.  I caution them to wait approximately six months to two years before they take advantage of any type of credit offers.  The reason to wait is that the longer you can wait after your bankruptcy filing, the better position you are going to be in to receive additional credit at a decent rate as well as have the ability to repay the debt.  Don’t worry about your credit score.  Worry about getting out of debt, finding financial solutions to your problems, and making sure that going forward you’re not going to fall back into debt again.  That is the strongest advice I can give someone who sees me for debt relief.