How does Bankruptcy Affect Your Credit Rating

If you are already struggling with debts to creditors, chances are that your credit scores are not that great to start with. Bankruptcy does have a negative effect on your credit rating for a period of time. Once you are discharged from your bankruptcy you are free to rebuild your credit. This can be achieved in a positive way by carefully using credit and other financial activities that will improve your credit rating over time. Most often starting out with a secured line of credit is the easiest way to establish new credit after a bankruptcy. After about three years you should be able to get credit cards and even a mortgage.
Once you have been made bankrupt all of your assets including your home are in the control of the Trustee. This can be a disadvantage along with some of the restrictions placed on you once you are declared bankrupt. Bankruptcy is a serious matter and there are implications that need to be viewed before you decide to file. These things can be overcome in time but can be embarrassing to deal with while going through the process of bankruptcy.

The following are things that will affect you and or your credit if you file for bankruptcy:
You will see your status in the newspaper
You will be required to fill out many forms with extensive detailed information and your affairs will be investigated
Any business you own may be closed immediately and any employees will be dismissed
You may lose assets of value including your home or insurance or even possible pensions
It is possible to lose any assets you acquire during your bankruptcy like inheritances, insurance settlements or your home’s value
Creditors, landlords and anyone you have business with will be informed
In some cases bank accounts are closed
All credit cards will be closed
In some cases anything you might be leasing or buying on hire purchase could be returned immediately
You may lose professional or business status
You may be rejected from employment opportunities
Bankruptcy can affect your marriage or relationship
While bankrupt you cannot apply for more credit
Going bankrupt could affect your immigration status
If you do not co-operate fully with the Official Receiver you may have a restriction order placed
Some debts like court fines and student loans cannot be written off
Most of the things listed above will be viewed negatively but be assured they can be overcome by anyone that needs to file bankruptcy to get a fresh start. It is not always easy to start over. Making a new financial strategy and positive attitude will allow you to overcome a negative credit score. The time it takes to better your score will vary in each situation. Always remember there are professionals available to help you make new financial goals and learn how to rebuild your credit. It is important that you do not attempt to rebuild your credit until you have been discharged from your bankruptcy. There are restrictions to applying for credit while you are still in the process. If you were to open new credit accounts you could find yourself in financial distress once again even before you have been discharged resulting in a further bankruptcy order and maybe even more consequences.

Some assets such as your house and sometimes your car may be kept and in these situations can actually help you to keep some positive credit. Even though you filed for bankruptcy, you are able to continue payment on any items that were kept and scheduled payments are made through the Court. This will still be shown on your credit report for a period of time but creditors will also see that you faithfully made those payments and could help in the decision to lend to you. Creditors will view your credit report and most often there are other things that will help you gain new credit. For example, when filling out new applications for credit they most often ask about current employment and other assets you may have. If they feel that you are once again financially stable they may give you a small amount of credit. If you utilize this credit and all the restrictions that come with it you will eventually be given more credit on this account. You will rebuild your credit.

Time, patience and strategic financial planning are what will mend your credit rating, whether you have filed bankruptcy or not. Your credit rating affects your life more now than ever. Credit scores make the difference of getting a job, or a loan, or give you a certain status. Bankruptcy gives you a chance to start over and create a credit rating that you deserve because you will work hard to achieve it.

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