Subscribe to our mailing list

X

Credit Scores Rise Dramatically After Filing Bankruptcy

By on June 20, 2018

The Federal Reserve Bank of Philadelphia did some research into the recovery of credit and credit scores following filing Chater 7 or Chapter 13 bankruptcy.

As with most empirical research into bankruptcy, the truth of filing is so much different than the actual process.

A favorite myth about bankruptcy is you can’t get credit again for ten years. I hear that over and over. Yet as the Federal Reserve Bank of New York found, Those That File Bankruptcy Do Better Than Those That Don’t.

And now there is this previously overlooked study which shows, “Credit scores start to recover dramatically before the date on which debt is discharged for both filer types.” – Source

Another myth I often hear is that future creditors will look more favorably on consumers who file a Chapter 13 bankruptcy where they struggle for years to pay what they can afford towards their debts. In a Chapter 7 bankruptcy filing the dischargeable debts are eliminated in about 90 days.

But the Federal Reserve Bank actually found, “Chapter 7 filers have a greater opportunity to acquire unsecured credit from new lenders than Chapter 13 filers do. The rebound in new credit cards occurred more slowly for Chapter 13 filers, possibly because they were using a portion of their income to pay down old debts and because they can file for bankruptcy again more quickly than Chapter 7 filers can.”

One finding from the authors was that following bankruptcy the access to greater amounts of credit may be limited. But considering that a fresh financial start can allow consumers to begin rebuilding their retirement savings and emergency funds quickly, the reduction in immediate access to larger credit lines seems a small sacrifice to make.

Studies following bankruptcy have been a bit limited but the authors found some interesting facts in previous papers. For example, “creditors repeatedly solicited debtors to borrow after bankruptcy, especially unsecured debt.”

READ  I Filed Bankruptcy. How Do I Legally Rebuild My Credit? - Janet

But given the fact that people in difficult financial situations attempt to limp along for years-and-years in an attempt to repair the past, those who file bankruptcy “borrow larger amounts of secured credit after bankruptcy filing than nonfilers.”

Since the paper was published, consumers are reporting easier access to unsecured and secured credit following bankruptcy when they focus on rebuilding their credit scores.

Last step, fill out the information below or call us for Priority Assistance.

What problems are you having with your report?

Your first name is required. Your first name is required to be at least 2 characters. Your first name cannot be longer than 50 characters.
Your last name is required. Your last name is required to be at least 2 characters. Your last name cannot be longer than 50 characters.
Your email is required.
Your phone is required. Your 10 digit phone number is required.
Your state is required.
Your age is required. Your age must be greater than 18. Your age must be less than 100.

By clicking on the "Contact Me" button above, you consent, acknowledge, and agree to the following: Our Terms of Use and Privacy Policy and to receive electronic communications. We take your privacy seriously. That you are providing express "written" consent for Debt.com or appropriate service provider(s) to call you (including through automated means; e.g. autodialing, text and pre-recorded messaging) via telephone, mobile device (including SMS and MMS - charges may apply), even if your telephone number is currently listed on any internal, corporate, state or federal Do-Not-Call list. Consent is not required as a condition to utilize Debt.com services and you are under no obligation to purchase anything.

By clicking on the “Contact me” button above, you consent, acknowledge, and agree to the following: (1)That you are providing express “written” consent for Lexington Law Firm, Debt.com or appropriate service provider(s) to call you (including through automated means; e.g. autodialing, text and pre-recorded messaging) via telephone, mobile device (including SMS and MMS – charges may apply), or dialed manually, at my residential or cellular number, even if your telephone number is currently listed on any internal, corporate, state or federal Do-Not-Call list; and (2)Lexington Law’s Privacy Policy and Terms of Use and Debt.com’s Terms of Use and Privacy Policy. Consent is not required as a condition to utilize Lexington Law or Debt.com services and you are under no obligation to purchase anything.

About Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

Share a Comment / Leave a Reply

%d bloggers like this: