This question, or some form of it, is asked by virtually every person that comes to see us to discuss their financial problems. The answer is usually simple. By the time they have come in to see us, their credit is already in bad shape! This does not necessarily mean that they have a bad credit score. Some folks manage to keep making minimum payments each month. Unfortunately, this is often done by taking cash advances against another card and or borrowing money from a payday loan store. But even in these cases, the poor individual is hopelessly over extended and living with a great deal of stress.
The old myth about bankruptcy ruining a person's credit for seven years seems to come from a belief that a bankruptcy filing can be listed on a person's credit report for seven years. This belief is incorrect. A Chapter 7 bankruptcy filing can, in fact, be listed on a filer's credit report for ten years from the date of filing. This does not mean, however, that a person has bad credit for ten years. In fact, a bankruptcy discharge can often make it EASIER to obtain credit.
Does not make sense? Well, think about it from a practical perspective. Say you go to a banker to borrow money today. You have NEVER filed bankruptcy. You have, however, been a week or two late on your mortgage or car payment a couple of times. You have about $25,000 in credit card debt and have only been making minimum payments for a while now. You may even have a payday loan or two. In other words, you are barely getting by. If the banker lends you money today, he will be competing with all your other creditors to be paid on his loan. You barely have enough money to pay them. How are you going to pay this new debt? In addition to this, the banker will have to consider the fact that you could file bankruptcy on the other creditors and him after he lends you the money. The likelihood of receiving your loan is next to none.
Now fast forward a few months. You filed a Chapter 7 bankruptcy and received Discharge of all your unsecured debt and now only have your car and house payments. Since that time, you have made your house and car payments on time every month. You have no other creditors. If the banker lends you money now, he will not be competing with other creditors. Furthermore, he will not need to worry about you filing another chapter 7 bankruptcy. You cannot file again for eight years after the first bankruptcy was filed. From this perspective, you are less of a risk now than you were before filing your bankruptcy and now your likelihood of receiving the loan is looking pretty good!
If you question this logic, call the finance manager at your local car dealership. You will likely learn that you can qualify for an automobile loan the day after you receive your bankruptcy discharge. Call a real estate agent. You will also learn that many people qualify for a mortgage within a few short years after a bankruptcy discharge.
Now this does not mean that bankruptcy is the best option for you. Bankruptcy should never be your first choice. If, however, you are struggling with debt, you should sit down with an experienced consumer bankruptcy attorney and fully explore how a bankruptcy will affect your credit.
Bond & Botes Helps People Struggling with Debt
At Bond & Botes, collectively our offices throughout Alabama and Mississippi have helped over 100,000 individuals and married couples recover from debt over our 30 years of doing business.
We are local and offer a free confidential face to face consultation. We also offer free consultations from the comfort and safety of your own home or office by phone and/or video with an experienced attorney. Let us solve your financial problems. There is no obligation, and that means no downside to gathering the information you need to make good decisions about how to break the cycle of debt stress and move forward. We can answer all your questions regarding Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, stopping a foreclosure or wage garnishment, avoiding liens, stopping lawsuits, discharging medical debt, personal loans, payday loans, credit card debt, etc. We can alleviate your stress! We want to help and we can help you!
Bond, Botes, Sykstus, Tanner & McNutt, P.C.
102 South Court St, Suite 314, Florence, AL 35630
Phone: 256-760-1010 • Fax: 256-760-1023
Office Hours: Monday – Friday • 8am to 5pm
No representation is made that the quality of legal services to be performed is greater than the quality of legal services to be performed by other lawyers.