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Michael D. Hart, P.C.
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540-627-6520
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Rebuilding credit after a bankruptcy

Virginia residents who are struggling to pay their bills and face daily harassment from collection agencies are sometimes reluctant to pursue debt relief because they are worried about the impact that filing a bankruptcy would have on their credit scores. While Chapter 13 bankruptcies remain on credit reports for seven years and Chapter 7 bankruptcies can be seen by lenders for 10 years, the fears over what effect this has on an individual's ability to borrow are largely based on myth.

People generally file a bankruptcy when their financial situations become unmanageable, which means that their credit reports often already contain negative items such as late payments and charge-offs. These negative items may lower credit scores to the point where a bankruptcy could make little difference. However, the possible plus side to filing a bankruptcy is a lower debt ratio that could actually cause credit scores to rise.

Credit scores are based on the amount of debt an individual has and how that debt is paid. Many debts are discharged in a bankruptcy, which lowers what bankruptcy filers owe in relation to their incomes. This reduction in the overall amount of debt is sometimes more than enough to offset the fall in credit scores caused by a bankruptcy. Bankruptcy filers who take prudent steps to rebuild their credit ratings are sometimes able to boast extremely high credit scores in just a few years.

Attorneys with experience in this area may explain the differences between a Chapter 7 and a Chapter 13 bankruptcy and also dispel the many misconceptions people have about debt relief. Attorneys may also point out that bankruptcy was introduced to give Americans the opportunity of a fresh financial start. One example of the ways the bankruptcy code offers relief to individuals struggling with debt is the automatic stay that is issued when a bankruptcy is filed. This is an injunction that orders creditors to cease their collection efforts.

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Michael D. Hart, P.C.
19 Church Street Southwest
Roanoke, VA 24011

Phone: 540-627-6520
Fax: 540-342-7655
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