Many people think that bankruptcy will immediately fix their financial problems. However, that isn’t how bankruptcy works. There is more to regaining financial security after bankruptcy than simply stepping out of the courthouse after your Chapter 7 case is filed.

Initially, bankruptcy filings take a toll on your credit score. If you’re in a position to need to file bankruptcy, your score has already taken a large toll, so any additional toll won’t be a surprise. Many people who could benefit from the relief bankruptcy affords never file because they don’t understand how it will really impact credit scores.

Understanding Credit Scores

We generally refer to your FICO score when we speak of credit scores. The FICO score is the number that creditors look at when determining your credit worthiness. The range in these scores goes from bad (less than 579) to excellent (800-850).

The higher your score is when you file bankruptcy, the greater toll the bankruptcy will take on your score. If your score is in the poor or fair range, you can expect your score to drop anywhere from 130-150 points when you file bankruptcy. If you’ve managed to keep a good to excellent score, your score will drop at least 200 points.

Your history will reflect the bankruptcy which will affect lender decisions by itself, but credit bureaus typically drop the score to ensure you improve your habits before you incur more debt and new credit accounts. Usually, you will see your credit drop to a poor rating regardless of where you started in the FICO range. There is a sliding scale system in place, and if your credit is already in the bad range (less than 579), you may not see your score drop much. Typically, scores don’t drop below 500 even after bankruptcy unless they were already that low.

You can improve your credit score over time, but it will take some concentrated work. Many people who work to improve their credit score can see improvement within a year to 18 months after bankruptcy. Remember that you can’t remove a bankruptcy from your credit report unless it’s on there by mistake.

Things Affected by Bankruptcy in Georgia

Several factors affect your credit score. Payment history, recent credit report additions, and reported on-time payments to affect how creditors view your credit worthiness. Filing Chapter 7 bankruptcy is reported negatively on your credit report. So, there are several things that can be affected by your bankruptcy. Those include:

• Buying or renting a home
• Buying a car
• The interest rate on financed items
• Low credit limits on credit cards (unsecured)
• Repayment schedules for student loans
• Late payment penalties
• The ability to use credit
• Receiving large cash deposits
• Obtaining a loan independently
• Adding authorized users to credit cards
• Security deposits
• Return of safety deposits

These concerns don’t have to keep you from improving your credit standing. You can get help addressing the concerns, and there are ways to address them on your own. Part of the reason for filing bankruptcy is getting a fresh start, so don’t allow yourself to feel defeated if it takes a while to rebuild your credit after filing Chapter 7 bankruptcy.

How Long Does Chapter 7 Bankruptcy Stay on Your Credit Report?

You can expect filing Chapter 7 bankruptcy in Georgia to remain on your credit report for ten years. That may seem like a long time, but it isn’t forever. Your discharged debts won’t stay on your credit report that long.

The good news is that most creditors only look at the last six months of reports on your credit history. What does that mean for you? For one thing, you can begin to attempt to rebuild your credit history after six months.

Remember that bankruptcy looks better to creditors than foreclosures or repossessions. Foreclosures or repossessions say that you simply stopped paying your bills, which looks worse to a creditor. Filing Chapter 7 bankruptcy in Georgia lets potential new creditors know that you recognize you have gotten into debt over your head and you need help to correct the mistakes.

Ways to Begin Rebuilding Credit in Georgia

One thing you absolutely must do after filing bankruptcy is to pay every payment you still have on time. For one thing, that will help to improve your credit score. For another, you can’t file bankruptcy again for quite some time, so you must ensure you don’t find yourself in the same financial position again.

Anywhere from a month to two years after filing bankruptcy, you can begin to see a positive difference in your credit score. Keeping good habits for at least a full year can improve your score from poor to fair. The bankruptcy itself can facilitate part of that because discharged items will be removed.

Approximately six months after filing bankruptcy in Georgia, you can begin thinking about secured credit cards as a way of rebuilding credit. Check with your bankruptcy attorney before you open any new accounts because your trustee may have specific time requirements before starting to rebuild credit or specific rebuilding programs you must use. When you are able to open a new account, you must ensure that you use your credit responsibly and that you make your payments on time.

One way to consistently build your score is to use your revolving credit wisely. Purchase something small, like groceries, with your secured credit card each month. Then, pay off the balance every month. This will help your score build, and it will also help your credit limits grow.

Rebuilding your credit score will take time. When you first begin to rebuild your credit, you will only see small improvements. However, as you maintain good habits and make on-time payments, you will significantly improve your score.

You should always be upfront with creditors about your bankruptcy filing. Some of them will choose to work with you and charge a higher interest rate. Others, however, will decide not to take a risk on you. Don’t take that personally; find another lender and try again.

Other Ways to Improve Your Credit Score in Georgia

No two financial situations are exactly alike. The best way to move forward with improving your credit score after you file bankruptcy in Georgia is to consult with your attorney. Your Georgia bankruptcy attorney has the expertise to guide you through the credit rebuilding process.

Here are some basic tips to get you started on the credit rebuilding process:

• Learn how to use credit properly. Take personal finance classes to help you learn how to manage your overall financial picture. Taking this step will help you minimize the chances of making the same mistakes that led you to file bankruptcy.
• Keep a check on your credit score. Checking your score yourself will not negatively impact your score. You can actually request free reports periodically, so you can review detailed information on your report and determine if you need to dispute anything on the report.
• Start and maintain an emergency fund. People typically file for bankruptcy because they let unexpected circumstances overwhelm them. If you put money into an emergency fund, you will have the cash to handle those unforeseen circumstances.
• If you must, find a reliable co-signer. Be extremely careful asking someone to cosign with you on a loan because your ability to repay it will affect them as well as you. It’s your responsibility to maintain the payments even with a co-signer, so you need to be fully aware of whether you will be able to do that before you ask someone to take the risk with you.
• Another option is to become an authorized user on someone else’s credit card account. Payments on the account will affect your credit score as well as the card owner’s score. You don’t want to do this unless you are confident that the person with the card always makes payments on time. This option is potentially less stressful for you and the person who is willing to help you bounce back financially.

Being financially responsible and maintaining good habits can keep Chapter 7 bankruptcy from negatively affecting your credit over time. Many people will see their credit scores reach a higher number than they had before they began the bankruptcy process within a year of the bankruptcy ends. Remember, consulting your bankruptcy attorney is the best way to learn how to proceed with attempts to rebuild your credit after filing Chapter 7 bankruptcy in Georgia.

Talk to A Qualified Chapter 7 Bankruptcy Attorney in Georgia

Filing Chapter 7 bankruptcy in Georgia remains on your credit report for ten years. The negative effects of the filing can disappear from your report much faster than that, though. You can take specific steps to rebuild your credit history after filing bankruptcy in Georgia.

Before you file Chapter 7 bankruptcy, consult with a qualified bankruptcy attorney to learn what your options are and how bankruptcy will help your financial situation. Your attorney can help you determine what steps are best for you to take when attempting to rebuild your credit after filing bankruptcy. Contact the qualified attorneys at Morgan & Morgan if you have questions regarding the bankruptcy or credit rebuilding process.

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