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How Bankruptcy Can Affect Your Credit

Many individuals file for bankruptcy due to loss of employment, danger of repossession, or to avoid foreclosure. If you’re being forced to file for bankruptcy, then you’ll want to discuss your options with a bankruptcy lawyer. Consider how bankruptcy can affect your credit.


How Bankruptcy Works

There are two main types of bankruptcy:

Chapter 7: Chapter 7 bankruptcy is a liquidation proceeding, and is the most common form of bankruptcy. When filing for Chapter 7 bankruptcy, you must turn over all non-exempt property which is then converted to cash and distributed to your creditors.

Chapter 13: Chapter 13 bankruptcy allows you to reorganize your debts so that you can pay them off over a period of 3-5 years. This is ideal for individuals with a great deal of non-exempt property.  



Rebuilding Your Credit

While filing for bankruptcy does not give you a clean slate, it does allow you the opportunity to rebuild your credit over time.

  • Some banking institutions specialize in offering credit cards to individuals who have filed for bankruptcy. Be sure to read the fine print, as the interest rates and annual fees are often much higher.
  • Applying for a small personal loan may also help you rebuild your credit. Many credit unions offer better rates and more lenient approval terms for individuals who have filed for bankruptcy in the past.
  • Be sure to carefully manage your new credit accounts; the last thing you want is to rack up a new high balance after you’ve filed for Chapter 7 bankruptcy or Chapter 13 bankruptcy.


If you need help filing for bankruptcy or rebuilding your credit, then contact our bankruptcy lawyers with Cutler & Associates, Ltd. With over 25 years of experience, our legal representatives are dedicated to resolving your debt issues.

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