Technically, bankruptcy stays on a credit report for seven or ten years, depending on the type of bankruptcy you file. There is basically nothing you can do to alter that fact. However, there is also a related question. How long a bankruptcy filing affects your credit score is almost entirely up to you.

These time periods begin at the filing date and not the discharge date. If Tom files Chapter 13 and receives a five-year repayment plan (more on that below), when the judge closes the bankruptcy, he only must wait two more years for the filing information to fall off.

With the help of an Athens bankruptcy lawyer, people like Tom can recover from bankruptcy faster than they thought possible. Attorneys guide people through the bankruptcy process, which is often a minefield. With a guide, you can get your fresh start without any unnecessary delays. An Athens bankruptcy lawyer gives you the tools you need to quickly raise your credit score.

The Benefits of Bankruptcy in Athens, GA

In a nutshell, many people are afraid to file bankruptcy because they are afraid of the effect the filing has on a credit report. As a general rule, you should make decisions based on fear. That’s certainly true in this context. These individuals deny themselves the benefits of bankruptcy.

One of the biggest bankruptcy benefits is the Automatic Stay. Many people file bankruptcy exclusively to stop adverse actions like:

• Wage garnishment,
• Repossession,
• Creditor lawsuits,
• Foreclosure,
• Utility shutoff, and
• Eviction.

Generally, Section 362 of the Bankruptcy Code stays in full effect for the duration of the case. Families get instant relief from aggressive creditors because bankruptcy protects your assets. In many cases, creditors do not need court orders to seize your assets and auction them off to pay your debts. Chapter 7 and Chapter 13 bankruptcy protect assets such as:

• House,
• Car,
• Retirement account,
• Current wages,
• Personal property, and
• Government benefits, like Social Security benefits.

Chapter 7 gives people with significant unsecured debts, like medical bills and credit cards, a fresh start within a few months. Chapter 13 gives people struggling with past-due secured debts, like delinquent mortgage payments, up to five years to erase their red ink.

Acquiring Major Assets During GA Bankruptcy

Many things happen in five years. The need for a new vehicle is a good example. The average new car lasts about 150,000 miles. So, if you are driving even a slightly-used vehicle when you file, it probably will not last another five years.

You can buy a car during bankruptcy. Once all the arrangements are in place, including the actual sales price, down payment amount, loan interest rate, and loan payments, an Athens bankruptcy lawyer can file a motion to incur additional debt. Judges normally entertain these motions if the:

• Terms are reasonably fair,
• Debtor has a demonstrable need for another vehicle, and
• Vehicle suits the family’s needs, as opposed to the family’s wants.

Unsecured creditors, mostly credit card companies, usually object to these motions. They argue that the debtor should increase debt repayments instead of buying a new car. Judges normally overrule these objections if the debtor has a strong enough need for a new car.

Buying a House or Other Secured Asset During an Athens Bankruptcy

This process also applies if you need to buy a house or other secured asset during bankruptcy. So, if you file bankruptcy, you might still be able to take advantage of historically low mortgage interest rates.

Recovering from Bankruptcy in Athens, GA

There is a persistent myth that bankruptcy “ruins” your credit score. True, bankruptcy lowers your credit score. But by the time most debtors file, their credit reports are riddled with late payments, charge-offs, and other negative information. These entries lower your score almost as much as bankruptcy. Additionally, the R-word implies that bankruptcy’s effect on your credit score is permanent. That’s definitely not true.

Regularly using a credit card is one of the best ways to raise your credit score. Buy something every month and pay more than the minimum every month. This behavior shows that you can manage credit responsibly, which is the basis of a credit score.

Building a Financial Reserve

Building a financial reserve is equally as important. As mentioned above, late payments lower your credit score almost as much as bankruptcy. So, it’s very important to stay current, especially on secured assets. A few hundred dollars in savings could make a big difference. Statistically, when people miss their bills, they are usually less than $300 short.

This step is easier for former Chapter 13 debtors. These families often continue making debt consolidation payments for a month or two, but instead of paying the bankruptcy court, they pay themselves.

Ask an Athens Bankruptcy Lawyer How You Can Improve Your Credit Score

How much does bankruptcy affect your credit score? The answer is largely up to you. For a free consultation with an experienced Athens bankruptcy lawyer, contact Morgan & Morgan, Attorneys at Law, P.C. We routinely handle matters in Clarke County and nearby jurisdictions.

Lee Paulk Morgan

Lee Paulk Morgan

With more than 41 years of experience in the areas of Bankruptcy, Disability, and Workers’ Compensation, Lee Paulk Morgan is one of the most respected Bankruptcy and Disability attorneys in Athens, Georgia. His tireless dedication to serving clients has gained him the reputation of a premier attorney in his areas of practice, as well as the trust and respect of other legal experts, who often refer clients to him.