When you are struggling financially and are unable to keep up with your debts and other financial obligations, you may be facing the difficult decision as to whether or not bankruptcy is the right choice for you. One of the biggest concerns you may have is what filing for Chapter 7 or Chapter 13 bankruptcy is, what effect doing so will have on your financial future, and what major purchases or financial steps you may want to make. Get to know some of the ways that bankruptcy will and will not affect your financial future so that you can decide if it is time to contact a bankruptcy attorney or not.
Bankruptcy Does Not Mean You Cannot Buy A House In The Future
Many people fear that bankruptcy means they will never be able to purchase a home again. This is not at all true. In fact, many people who have filed for bankruptcy have gone on to be happy homeowners again in the future.
Though bankruptcy does not mean you will never buy a house again, there will be a waiting period before you are able to get a mortgage loan again. The exact amount of time you will be waiting depends on both the type of bankruptcy you filed and the specific financial institution you will be seeking a mortgage loan from.
Chapter 7 bankruptcy may mean you need to wait several years to purchase a new home. However, with chapter 13 bankruptcy, it may be possible to purchase a home after a year or two of filing.
Bankruptcy Does Affect Your Credit But Maybe Not How You Thought
Bankruptcy does have an impact upon your credit score. This is a common conception about bankruptcy that happens to be true. However, this does not necessarily mean that your credit score will tank when you file.
In fact, if you have had numerous accounts that were severely delinquent or even in collections, completing the bankruptcy process could actually get your credit back on track and raise your score. Your payment history makes up a large percentage of your credit score. If you have a terrible recent payment history full of delinquencies, the addition of your bankruptcy will only make a marginal impact.
However, what bankruptcy will do, especially if you file Chapter 7 bankruptcy, is reduce your total debt load. Your total debt also significantly impacts your credit score, nearly as much as your payment history. Therefore, bankruptcy could potentially increase your credit score, at least a little, from the beginning. And, as you move forward, your credit will continue to improve as long as you do not incur any additional delinquencies or negative credit. With time and effort, you may even have a good or excellent credit score.
Keeping all of this information in mind, you can get a better picture of how filing bankruptcy can affect your financial future so you can better determine if contacting a bankruptcy lawyer and getting the process started is right for you.