Filing bankruptcy allows someone to resolve many of their debts. In some cases, the debts don’t have to be repaid and are essentially erased. However, even though the debts are gone, the trauma bankruptcy causes to someone’s credit rating can last for many years. It’s important to understand these negative aspects of bankruptcy before filing in order to make a well-informed decision.
Bankruptcy generally causes a significant drop in credit score. Sometimes though, a person who has waited a while to file already has a very low score and the filing won’t make much of a difference initially. The effects in these cases come later. Lenders are hesitant to extend credit to people who have recently filed bankruptcy and haven’t re established a good payment history. Unfortunately, it can be difficult to prove responsibility when no one will offer the opportunity to make regular payments on a loan or credit card. A bankruptcy lawyer may offer advice on how to rebuild credit after the case is discharged.
There are some credit card companies and auto lenders who are willing to work with people fresh out of bankruptcy. This credit comes with a very high interest rate and might not be affordable for someone with past credit problems. A secured credit card is another option but those sometimes require a sizable initial investment. Saving the money to open one of these credit accounts might be worthwhile in helping to re establish credit.
Potential employers as well as leasing offices typically request a copy of an applicant’s credit report before making a decision. Since there are no laws protecting people who file bankruptcy from discrimination in employment or housing, it can be difficult to get a job or find good housing soon after a bankruptcy. While it may seem unfair, the reasoning behind this is that anyone who files bankruptcy may be viewed as less responsible. A bankruptcy lawyer might offer advice on dealing with this situation so their client can get a job and find a place to live.
With time, these challenges lessen and it will be less difficult to get new credit, employment and housing. Visit to learn more about the pros and cons of bankruptcy.
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