Bankruptcy and Debt
Filing for bankruptcy can be a very personal and emotional decision. You are probably worried about a number of things, including what filing for bankruptcy will do to your credit now and in the future. Bankruptcy certainly will affect your credit, but it is important to realize that if you are currently considering bankruptcy, your credit is probably already suffering.
To truly understand the impact that debt, late payments, and even bankruptcy have on your credit it you first must understand how credit is calculated. Credit is calculated by evaluating five different areas, including: payment history, amounts owed, the length of your credit history, and new credit, and the types of credit you use. Your payment history accounts for about 35% of your credit score and the amounts owed accounts for about 30% of your credit score, for a combined total of about 65%. If you are currently making all of your minimum payments on time you are doing well in that area, but depending on how much debt you have your credit may still be lower than you would like. If you are not currently making your minimum payments on time and you owe a substantial amount of money your credit score is taking a hit in both areas. It is also important to remember that the types of credit your use affect your score, so if your debt is primarily consumer your credit score may be negatively affected.
Bankruptcy can eliminate your unsecure debt. This means that you will not owe any money and you will not continue to take negatively affect your credit every month with late or missed payments. In fact, filing for bankruptcy actually increases some individual’s credit scores. Even for those individuals that do not see an immediate credit score increase, we can provide you with advice on how to begin to improve your credit after filing for bankruptcy.
Many people like to have a credit card available for emergencies or unexpected expenses. Others prefer to charge small amounts monthly, like gas, and then pay the balance in full each month. Whatever your preference, you are likely curious about obtaining credit after bankruptcy and when you are eligible for more credit. In many cases, after you file for bankruptcy, you will begin to get a number of unsolicited credit card offers in the mail. You should be wary of these offers. A lot of times, though they offer to help you rebuild your credit, these are not good offers. Many of those credit cards charge annual fees, usage fees, and have high interest rates and you will likely have a large balance right away. If you want to rebuild your credit you should ask your St. Louis Bankruptcy Attorney for a referral or make an appointment with your bank or credit union to discuss the best options for you.