Personal bankruptcy is a debt resolution thousands of people in Florida and around the country have used in order to get their finances in order. But, even though the process is rather common, many consumers still approach bankruptcy hesitantly amid fears that their credit will be destroyed if they file. However, this is not always the case, especially when filers make a conscientious effort to improve their credit afterwards.
For example, consumers who have successfully exited Chapter 13 bankruptcy typically become eligible again for Federal Housing Administration mortgages just one year later. With a Chapter 7 bankruptcy, it’s two years. And while with more conventional providers the wait could be extended, the point is that ineligibility is not necessarily forever.
And, while bankruptcy is certainly considered when applying for a loan, it is not the only factor lenders look at. This is why it’s important to re-establish credit in order to show financial responsibility. There are easy ways to accomplish this, such as paying bills and rent on time and using a secured credit card responsibly.
In some cases, bankruptcies also result from unavoidable and one-time circumstances such as death, divorce or illness. In these types of cases, the wait time after a bankruptcy can sometimes be reduced if a hardship letter is provided to a lender explaining the circumstances and offering supporting documentation.
Of course, this is all good new, as last year there were 1.362 million bankruptcies filed across the country. Of those, about 70 percent fell into the Chapter 7 category.
In the end, the take home message is that bankruptcy does not necessarily ruin credit. This being said, those thinking of filing often have questions that need answers, which is why it’s good to work with a Florida attorney who has experience with bankruptcy. This can help when answering questions regarding both now and what the future could look like.
Source: The New York Times, “Life After Bankruptcy,” Vickie Elmer, Sept. 13, 2012