Bankruptcy Lawyer Elgin IL – ASM Law
FAQs About Bankruptcy and Credit Scores
-I’m thinking about filing for bankruptcy, but how would that impact my credit score?
This is a very understandable concern for anyone considering a bankruptcy filing. Creditors, naturally, do not like to spot a bankruptcy filing upon your latest credit report. However, the consequences it brings depends a lot upon what your credit was prior to filing.
If you’re behind on accounts, carry a lot of debt and possess minimal assets, your score is probably low already. Upon filing for bankruptcy, your credit score will likely take a moderate drop. However, if the score is good before filing, it will take a significant drop afterwards. According to the most commonly-used credit scoring firms.
-Is filing for Chapter 7 bankruptcy preferable to filing for Chapter 13
Generally, the type of bankruptcy for which you file does not matter with respect to credit scoring.
However, there’s a possibility that a creditor might view one type of bankruptcy differently than another. For example, a creditor may view someone filing for Chapter 13 as a better credit risk than someone who files for Chapter 7.
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-Will a bankruptcy filing eventually help to improve my credit score?
Bankruptcy filing does not result in an improvement right away to one’s credit score. Although, for many Illinois residents it does provide a path to an eventual improvement to their score. Perhaps you are far past due on credit card payments or you already have accounts that are in collection. A bankruptcy filing can enable you to financially recover sooner than other varieties debt management plans. This is because it eliminates many kinds of debts to clear the way for a fresh start. When you lower your debt amount and get a handle on your finances, you’ll begin making payments on schedule. Additionally, you’ll start reducing your debt-to-income and take effective steps to restore your credit score.
As a useful exercise, consider what may likely happen if you do not seek bankruptcy protection. For instance, you continue struggling to make late payments and keep defaulting on your debts. In that case, you will never make progress and rehabilitate your credit score.
However, be aware that there certainly are other ways to gain control over your debts besides bankruptcy. Consult with a Bankruptcy Lawyer Elgin IL for more information – we can recommend what your best options are for restoring your financial situation.
-Is it possible to start improving my credit score following a bankruptcy?
Yes. You may begin restoring your credit score immediately even though the bankruptcy stays on your credit score report for as long as ten years. Here are some of the factors that credit scoring firms consider when they calculate your score:
-Your payment history. Basically, they look at whether you make payments on time or if have made a bankruptcy filing before.
-The current debt you carry.
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-The length of your credit history and if you apply for new credit. Ask your Bankruptcy Lawyer Elgin IL for more details on this aspect.
Simply by making payments on schedule, you’ll start improving your credit score after filing for bankruptcy. Make every effort to keep your debts at a minimum, particularly in comparison to the credit available to you. When you are in a position to do, obtain a credit card make minor purchases. Pay the bill in full each month.
-After filing for bankruptcy, will I ever be able to get a loan?
This matter largely depends upon what type of loan (or credit) you are seeking.
Auto loans. In most cases you will able to obtain a car loan soon after a bankruptcy filing. However, you’ll be doing business with subprime lenders. That can mean high interest rates and other, less than favorable loan conditions. There are car loan firms for people who have been denied previously because of bankruptcy. It’s fairly easy to learn if you are eligible for this type of loan following bankruptcy.
Credit cards. It’s not uncommon for filers to receive multiple offers from credit card companies after concluding bankruptcy. Without a doubt, these companies know you cannot file for bankruptcy again for several more years. Consequently, that means you are not able to discharge credit card debts you accumulate in that time. That’s why they want your business. However, these credit card offers typically come with steep interest rates and yearly fees.
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Mortgages. It generally depends on the lender with respect to how much time it will take for you to obtain a mortgage. For instance, you may be able to qualify for an FHA mortgage even prior to finishing a Chapter 13 bankruptcy plan. Or, two years following a Chapter 7 filing. There is also a waiting period with respect to conventional loans if your lender works with Freddie Mac or Fannie Mae. For example, you’ll need to wait for two years following a Chapter 13 filing and four years after a Chapter 7 filing. The waiting period might be longer if your lender does not sell loans to Freddie or Fannie. Note that in some cases it may be a lot longer until you can obtain a mortgage. Other issues that impact your qualification include your debt load, income and amount of down payment.
-What are the Main Differences between Chapter 7 and Chapter 13 Bankruptcy?
Chapter 7 is a form of liquidation that eliminates much of your unsecured debts like credit cards and hospital bills. With this type of filing, there is no need to repay balances on a repayment plan. To qualify, you must fulfill certain income requirements. When filing for Chapter 7 bankruptcy, an order known as an “automatic stay” offers protection against creditors. It orders them to cease collection efforts. Additionally, the court appoints a bankruptcy trustee as administrator of your case. Along with reviewing your bankruptcy paperwork, the trustee’s main job is to sell your property back to the creditors.
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Alternatively, Chapter 13 is a form of reorganization for debtors with steady income who are able to follow a payment plan. Most who file for Chapter 13 make too high of an income to qualify for a Chapter 7 filing. The majority of people who select Chapter 13 do it because it provide some benefits that not Chapter 7 does not. For example, it provides the ability to get current on overdue mortgage payments.
With a Chapter 13 bankruptcy filing, you may retain all your property. In exchange, you’ll need to repay all or some of your debts according to a repayment plan. This amount shall depend upon your income, living expenses and the type of debt you are carrying. In general, a Chapter 13 bankruptcy filing is appropriate for debtors that:
-Seek debt relief but do not qualify for Chapter 7. For example, to reduce credit card payments, halt litigation against them or avoid wage garnishment.
-Carry non-dischargeable debts like child support or alimony that they would like to pay within three to five years. Or, they are late on mortgage or car payments and wish to catch up on payments and hold on their property.
Consult with a Bankruptcy Lawyer Elgin IL today and learn more about your legal options. Bankruptcy offers protections that can enable you to recover financially.