Rebuilding Credit After Bankruptcy in Las Vegas, Nevada
Our Las Vegas Bankruptcy Attorney Can Assist You on Getting a “Fresh Start”
One of the most common questions our clients have is if their credit will be ruined forever by filing bankruptcy. There is no denying that a bankruptcy can have a negative effect on your credit, but it could be better than consequences of debt like garnishments, liens, and repossessions. However, there are steps that a filer can take to minimize the negative impact on their credit score. Many of our clients actually see an improvement in their score in the year after their case is discharged.
The Initial Impact
Bankruptcy’s effect on your credit immediately after filing will depend on the state of your credit before filing. If you have good credit before filing bankruptcy, it will likely decrease dramatically when your petition is first filed. However, this isn’t usually the case for people seeking to file bankruptcy. People with moderate to low credit scores may actually see a slight increase in their credit score just after filing, if there is any effect at all.
Your attorney will most likely use your credit report to find all of your creditors and their mailing addresses. Some of these reports are specially designed for bankruptcy filings and will project that person’s score one year after filing. You should check with your attorney if they use a similar service if you are concerned with the long term effects of bankruptcy on your credit.
When your petition is first filed, something called the Automatic Stay goes into effect. The Automatic Stay stops your creditors from pursuing debt collection through means like wage garnishment and repossession. The freeze on your assets works both ways, and you won’t be able to use credit cards or incur new debts. If you are in a Chapter 7, this will last until your case is discharged, typically 4-6 months. A Chapter 13 lasts 3-5 years, but you can request permission from the court to incur new debts.
Financing a Vehicle
Financing a new vehicle is a step you can take to rebuild your credit relatively early in the bankruptcy process. Many car dealerships work with lenders who specialize bankruptcy cases. They are able to finance a vehicle to bankruptcy clients before their case is even discharged. Some of our clients have been able to finance a vehicle as soon as the day after filing.
Incurring a new debt immediately after discharging all of your unsecured debts may sound counterintuitive at first. However, many American lifestyles simply aren’t possible using public transportation. If you currently have an auto loan that is too expensive for your budget, you can surrender that vehicle and its loan in your bankruptcy. You still need a car to get around, so financing a new vehicle is a good investment if you find a reasonably priced car with a good interest rate. Surrendering your vehicle is also a good opportunity in bankruptcy if you are having mechanical issues with your car.
Financing a vehicle after your bankruptcy, as opposed to continuing to pay on your current vehicle, will have a better impact on your credit. This is because after a bankruptcy, your current lenders aren’t required to report positive impact. They may continue to report negative things like late or missed payments, so keeping your vehicle can at best have no impact on your credit, and at worst will decrease your score. If you take out a new vehicle loan after your petition is filed, that lender will be required to report your positive payments. This will help boost your credit score after bankruptcy.
Secured Credit Card
Once your bankruptcy is discharged, you will probably receive numerous offers for new lines of credit in the mail. If credit card debt led you to filing bankruptcy in the first place, you should be hesitant to incur new credit card debt immediately after having it all discharged. However, opening a new credit card and making timely payments can help improve your credit score. Your bank most likely offers secured credit cards, which are prepaid credit cards directly through your bank. Opening a secured credit card is a safer way for you to improve your credit score after bankruptcy.
Post-Filing Bankruptcy Payment Plans
Because all debts (including those to an attorney) are discharged the moment a Chapter 7 bankruptcy petition is filed, most bankruptcy attorneys require payment in full before filing a case. This may work for some people who aren’t in a dire situation, but those who are facing garnishment or repossession don’t have the time to save up the filing and attorney’s fees for bankruptcy. That’s why some bankruptcy attorneys offer post-filing payment plans through a process called bifurcation.
The first step to bifurcation is filing a shorter version of your bankruptcy petition known as a skeleton petition. All that is needed for a skeleton petition is your income and basic contact information, along with the creditor mailing matrix. Debts incurred before this debt are discharged, but debts incurred from this point on won’t be discharged in the bankruptcy. The attorney will then file the second, full version of the petition. Work for the skeleton petition will technically be pro bono, and the attorney will charge for work completed after the skeleton petition is filed. Because that debt isn’t discharged, the attorney can accept monthly payments for their fees after the case is filed.
These types of payment plans are especially helpful for people with wage garnishments, as the garnishment stops once the bankruptcy is filed, and a monthly bankruptcy payment is usually far lower than whatever would be taken in a wage garnishment. There can be another benefit to using these payment plans- some firms’ plans may credit report. Just like with a car or credit card payment, timely payments will improve your credit score, but missed payments will negatively impact your score. Check with your attorney before signing your fee agreement that payments for their plan are indeed credit reported.
Contact Our Nevada Bankruptcy Attorneys Today!
If you’re still apprehensive about the potential effects bankruptcy could have on your credit, call our office to schedule a consultation. Our experienced attorneys can review your personal situation to determine if bankruptcy will be good for your credit in the long run. Declaring bankruptcy is a big decision, and you don’t have to make it alone. Get started towards a financial clean slate by scheduling your free consultation today. Call our Las Vegas Bankruptcy Attorneys today for a free consultation and debt evaluation. Learn more about Life After Bankruptcy in Las Vegas and how you can get a “Fresh Start” with your financial future.