Recovering from Bankruptcy in Illinois

Technically, bankruptcy filings generally remain on credit reports for seven to ten years. However, credit history reports are usually organized by date. So, the more current, positive activity a family has, the lower a bankruptcy filing usually goes on a report. And, since many lenders only care about the last twelve months, with some thoughtful effort, a bankruptcy filing could fall off your credit report far earlier than that, at least for practical purposes.

The best Chicago bankruptcy attorneys do not simply file forms, represent you in court, and say goodbye after the judge closes the bankruptcy. A combination of experience and a strong professional network means that attorneys can help former debtors recover much more quickly from bankruptcy than they would have otherwise.

Why File Bankruptcy

The seven-to-ten-year credit history myth is not the only one. Many people hesitate to file bankruptcy because they are afraid it will “ruin” their credit ratings. Typically, by the time people consider bankruptcy, their credit scores are usually quite low, typically because of repeated late payment entries. So, filing bankruptcy usually reduces your credit score from bad to worse, but the effect is usually not overly dramatic.

Therefore, credit score fears should not keep you from regaining control of your finances through bankruptcy. The Automatic Stay immediately halts all adverse creditor actions, giving families needed breathing room. Additionally, bankruptcy protects your key assets and wipes out most credit cards, medical bills, and other unsecured debts.

Once the judge closes the bankruptcy, the focus shifts to rebuilding the debtor’s credit score. This task is relatively easy to accomplish, if the debtor works hard. There are no shortcuts in this area.

Using Credit Wisely

Your credit score measures your ability to use credit and not your ability to put off major purchases and rip up your credit cards. So, this step is critical. Otherwise, your credit score will remain low, even years after the discharge.

Almost everyone qualifies for a secured credit card with a low spending limit. Typically, after a few months of on-time payments, the bank at least considers raising the spending limit without requiring an additional deposit.

In terms of use, charge something on this card every month and make more than the minimum payment every month. There is some dispute as to whether it’s best to pay the entire balance or leave a bit, so the bank can charge interest and make money. A few months of careful credit report monitoring should provide the answer.

Remaining Current on Secured Debt Payments

This second step is almost as critical. Auto loans, mortgage payments, and other such lenders usually report information directly to the credit bureaus. Ditto student loan borrowers and several other kinds of lenders.

Making these payments on time is an excellent way to raise your credit score. Paying bills like these on time makes up about half your credit score.

In fact, much like your secured credit card, it is usually a good idea to make more than the minimum payment. Building a reserve builds goodwill with the lender. So, when the next financial storm hits, you are in a better position to weather it. Additionally, making thirteen payments a year instead of twelve could save you thousands of dollars in interest payments.

Be sure you specify that the extra payment should go to the unpaid principal balance. Otherwise, the bank may assign that money to prepaid interest, and you do not build additional equity. 

Connect with Dedicated Lawyers

Quickly rebuilding your credit score after bankruptcy is definitely not an impossible task. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.

Resource:

credit.com/blog/7-bankruptcy-myths-debunked-64540/