Bankruptcy & Your Credit Rating Essex County NJ Attorney

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Bankruptcy Is Not the End -- It's the Beginning

In a 2008 study published in the Iowa Law Review*, law professor Katherine M. Porter told of families who had recently filed bankruptcy, only to receive numerous offers from credit companies. Clearly, bankruptcy does not seem to prevent people from obtaining credit.

If you are looking at this page, there is a good chance that your credit has already been affected by your debt. You are probably experiencing harassing phone calls from creditors, wage garnishment at work and a feeling of helplessness. If you have reached this stage, your creditors have almost certainly reported you to the credit agencies.

Without filing bankruptcy, your chances of getting credit now are limited. After emerging from bankruptcy, you can almost certainly get some type of loan, mortgage or credit card in the next few years. Although each case is different, the credit industry views bankruptcy as a fresh start and will make loans or extend credit to people who have filed Chapter 7 or Chapter 13 bankruptcy.

How is this possible"? When you file for bankruptcy, you eliminate or reschedule your debt. If you don't file, you will still have the bad credit rating and credit organizations will usually stay away from you or charge you onerous rates. Not filing reduces your credit options significantly.

Many people ask, "A bad credit rating stays on my record for seven years, whereas bankruptcy stays on my record for 10. Isn't it better to try to repair my credit score without bankruptcy?"

The short answer to this question: If you don't file bankruptcy, you won't get credit for many years. If you do file, you will probably get credit card offers that can allow you to rebuild your credit more quickly. By paying off your balance on time or by paying more than the minimum regularly, you are taking steps to rebuild your credit.

Although you might begin with a low credit limit or a security requirement (your house, a cash deposit or some other type of security), you will be able to raise your credit limit and be eligible for a mortgage or other loan more quickly than if you had not filed bankruptcy. Of course, if you have a secured card, you don't want to run a balance -- you'll be paying interest on your own money!

Once you have demonstrated your ability to make regular payments on time, you can request an unsecured credit card. You can rebuild your credit even faster by paying all bills on time -- phone, rent, utilities, cable, and other expenses.

At our law firm, bankruptcy is all we do. Our attorneys understand that most people file bankruptcy because of job loss, catastrophic medical expenses, or other life events over which they had no control. We advise people who are unable to obtain credit after bankruptcy to consider filing letters with the credit rating agencies describing why they were forced into bankruptcy. They have the right to do this, and it can only help when applying for credit. There are many other ways to start rebuilding your credit after bankruptcy. Our lawyers can help.

*Porter, Katherine M., Bankrupt Profits: The Credit Industry's Business Model for Postbankruptcy Lending. U Iowa Legal Studies Research Paper No. 07-26; Iowa Law Review, Vol. 94, 2008. Available at SSRN: