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If you are unable to manage your debt, you can file Chapter 7 or Chapter 13 bankruptcy. While this may not be the ideal outcome, bankruptcy stops creditors from taking action to collect their debts and repossess your property. It also gives you a clean slate so that you can work on building back your life. 

One of the main drawbacks of filing bankruptcy in Brooklyn is the effect it has on your credit score. Declaring either Chapter 7 or Chapter 13 bankruptcy reflects poorly on your ability to pay back the money you borrow. Therefore, future lenders may view you as a risk. 

Fortunately, there are ways to build back your credit following bankruptcy. In a reasonable amount of time, you can start repairing your credit. In fact, you’ll be able to apply for a new credit card as soon as your bankruptcy case is completed, and you can qualify for a traditional loan after a year or two.

How Long Does Bankruptcy Stay on Your Credit Report? 

A Chapter 7 bankruptcy will remain on your credit report for 10 years from the date the bankruptcy was filed. After 10 years, the bankruptcy will fall off your credit report. A Chapter 13 bankruptcy will stay on your credit report for seven years. 

Initially, a bankruptcy will lower your credit score. According to FICO, filing for bankruptcy can drop 200 points or more on a good credit score of 700 or above. If your score is lower, you can lose between 130 and 150 points. 

Even though you’ll take an initial hit, it’s not uncommon to start seeing new credit shortly after filing. Your credit score updates every month, so you can start rebuilding your credit right away. Even though the bankruptcy will remain on your credit report, its impact decreases over time. 

Ways to Rebuild Your Credit Following Bankruptcy in Brooklyn 

For some people, the only way to get out of debt is by filing bankruptcy. This is nothing to be ashamed of – most of us go through financial difficulties at some point in our lives. As you recover from bankruptcy, here are some things to put in motion: 

  • Save money and build a budget. After going through bankruptcy, the last thing you want is for history to repeat itself. Establish a realistic budget to manage your income and expenses, and start putting away money. 
  • Pay your bills on time. Now that you’ve eliminated the majority of your debts, this will free up money so that you can pay your bills on time. Payment history accounts for 35 percent of your overall FICO credit score.
  • Monitor your credit report. Even though it might be intimidating to look at your credit report, it’s important to monitor it diligently. Make sure that everything is accurate, as incorrect information can cause your score to be lower than it actually is.
  • Attend credit counseling. As part of the Brooklyn bankruptcy process, you will have to complete pre-bankruptcy credit counseling. There are also a number of online money management tools you can leverage. 
  • Make an emergency fund. With more money freed up, you can hopefully start building an emergency fund. This will help you avoid being in debt in the future. No matter how small the deposits, they will add up over time!

Is Filing Bankruptcy in Brooklyn NY Worth It? 

The credit implications of filing bankruptcy may not be ideal, but you can start working immediately to rebuild your credit. It is possible to improve your score in 30 days, but to repair your credit, you’ll need about one to two years. 

The good news is that filing bankruptcy will give you a fresh start and get the creditors off your back. You can also avoid missed payments, defaults, repossessions and lawsuits – all things that can hurt your credit more than bankruptcy. 

To discuss the possibility of filing Chapter 7 or Chapter 13 bankruptcy, schedule a free consultation with The Law Office of William Waldner. Our bankruptcy lawyer in Brooklyn will go over the pros and cons of filing bankruptcy so that you can make an informed decision.