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The impact of an old bankruptcy versus a new one

On Behalf of | Jun 20, 2019 | Bankruptcy |

When trying to figure out whether to file bankruptcy, most New Jersey consumers wonder what their credit will look like afterward and whether they will ever receive credit again. Most people assume that a bankruptcy will ruin their credit forever when, in many cases, the opposite is true.

If you have a substantial amount of debt you cannot pay right now, your credit score is likely dropping rapidly. When you file bankruptcy, that stops since successfully completing the process and receiving a discharge wipes the slate clean. Depending on the circumstances, your credit score could actually rise.

You have to rebuild your credit

A chapter 7 bankruptcy remains on your credit report for 10 years. A chapter 13 bankruptcy remains on your credit report for seven years. During that time, if you remain financially responsible, your credit score will rise. More than likely, you will begin to receive offers for credit cards shortly after your discharge since creditors know you don’t have all that debt anymore. With proper planning and diligence, you could rebuild your credit within just a couple of years.

You may pay higher interest rates during this time, but that could also change over time. The older your bankruptcy is, the more time you have after it to let lenders know that you remained fiscally responsible. The closer in time it is to your discharge, the less willing some creditors may be to extend credit to you. For this reason, an older bankruptcy could have an advantage over a newer one. However, that could change over time depending on your monetary habits.

Would filing bankruptcy help you?

Now that you know bankruptcy doesn’t ruin your credit forever, you may be wondering if it would be the right debt relief option for you. Even if it is, you need to determine which chapter would best fit your circumstances and if you qualify for the chapter you want to file. Answering this question may be the easy part of the process, however.

The documentation requirements, court deadlines and more make filing for bankruptcy a risky process to undertake on your own. If you fail to meet one of the court or trustee’s requirements, the court could dismiss your case, and you could end up right back where you started. In order to increase your chances of success, you may want to schedule a consultation with a New Jersey attorney experienced in the process and its requirements.