“Dear Steve,
My fiance is considering filing for Chapter 7. He has okay/good credit, but more than $25,000 in credit card debt and his payments severely limit our finances. He does not have a car or house that creditors can seize for payment.
I’ve read that bankruptcy will stay on your credit for 10 years, but other people have told me that it will affect your credit for the rest of your life. If he files for bankruptcy, how will this affect our chances of buying a house or a car in the future years?
Jennifer”
Dear Jennifer,
Ironically if he files for bankruptcy you probably have a better chance of getting a house. I know that sounds crazy but bankruptcy will wipe out his debt. Once that is gone he can begin to save for a down payment. The larger the down payment, the easier it will to get a loan.
If his credit is bad now and he is behind in bills, filing bankruptcy will increase his score by about 150. Again, ironic isn’t it.
After the final bankruptcy discharge and start rebuilding his credit with a new credit card or two. He might have to get secured cards to do that. Not a big deal. That will begin to report new and good information about him which will bring his score back up.
We happen to be in a current economy where lending it tight but it will give you guys time to put all of this is place. I think if you follow this advice that you’ll be in a new home within 30 months.
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Thanks again for the advice. My now husband had his bankruptcy hearing and debt discharge in August and we are so happy we went through with our decision!
Jennifer,
Awesome. So I was able to help you then?
Steve
Thanks so much for the advice. We have an appointment scheduled to meet with the bankrupty laywer next week. Here goes nothing!
Thanks for the help! Another question: once he’s made the decision to file for bankruptcy, should he stop all payments on credit cards, even before he’s begun the legal proceedings for Chapter 7?
Jennifer,
It will obviously hurt his credit to do so but if he is going to file within 120 days then it seems to make logical sense to stop sending further payments that could be accumulated to pay for bankruptcy. That is what a lot of people do.
Steve
One of things I do after a client hires me to file bankruptcy is get a copy of their credit report. This helps me determine their current credit score and how bankruptcy might impact their score.
Most people that hire me already have bad credit. The bankruptcy allows them to put some distance between them and any bad payment history. Although most of my clients don’t see a dramatic increase in their credit score, increase of 50-75 points are common and I have seen increases as high as 180 points.
.-= Carl H. Starrett II´s last blog ..California’s 90-Day Foreclosure Moratorium Really Isn’t =-.