A Texan who has accrued enough debt that filing for bankruptcy is a viable and necessary option need not be ashamed of what the person is going through. Bankruptcy is a useful tool to assist with debt relief when unexpected issues — both personally and professionally — arise. That, however, does not diminish how a bankruptcy proceeding can have certain negative influences to a person’s life. One particular issue that frequently arises is the decline of a credit score.
Those who file for bankruptcy are undoubtedly aware that it will harm their credit score, but many do not know the extent of that. For example, people who file for Chapter 13 bankruptcy will have that on their credit report for the next seven years after the process has been completed. With Chapter 7 bankruptcy and Chapter 11 bankruptcy, it can last for a decade. If a person has a bankruptcy on the record, it is not unusual for a credit score to drop by hundreds of points because of it.
With a lower credit score, a person might have trouble obtaining credit. If they do receive credit, the interest rates can be astronomical. For those who have completed a bankruptcy, they might have to wait up to four years before being approved for a home mortgage. Some credit card companies cater to those with poor credit, but they too will have a significant interest rate and they generally do not have attractive rewards programs. Trying to purchase a car following a bankruptcy can also be problematic. It is possible, but the interest rate can be more than 16 percent in comparison to those with good credit who pay slightly more than 3.5 percent.
For some, their bills have grown so hefty that filing for bankruptcy is the only option they have. It is a useful tactic for a large number of people who are facing financial problems. With that, though, it is important to have a grasp on what the long-term costs are in terms of credit. Speaking to a legal professional can provide advice and possible alternatives to get a fresh start regardless of the situation.
Source: Motley Fool, “3 Consequences of Declaring Bankruptcy That You May Not Be Aware Of — Matt Frankel, credit score,” Matt Frankel, Dec. 28, 2015