If you have tons of unpaid bills, bankruptcy may seem like a really attractive way to escape. Whether you choose Chapter 7 or Chapter 13 bankruptcy, you should be able to get your debt load down to a manageable level and put yourself back on the road to financial stability. One surprising benefit of filing for bankruptcy with the help of a bankruptcy attorney Orange County CA is that it can actually improve your credit score over time. Here’s why.
Removing Charge-Offs and Collection Items
By the time you file for Chapter 7 bankruptcy with help from your bankruptcy attorney Orange County CA, your credit score has probably already been trashed. Debt collectors have no doubt reported your unpaid bills to the credit bureaus, resulting in charge-offs and collection items being placed on your credit report. Each of these items can knocks of hundreds of points off your credit score. However, by declaring Chapter 7 bankruptcy, you can replace these items with a notice indicating that they have been included in your bankruptcy filing. This should set the balances of the accounts in question in zero, end all collection activities, and prepare you to start rebuilding your credit.
Recalculating Your Credit Score
Another benefit of filing for bankruptcy is that your credit score will be recalculated. This might give you a slight boost, because your FICO score is calculated in relation to other consumers who are in the same boat as you are. Instead of just being compared to other consumers, after bankruptcy you will be compared specifically to other bankruptcy filers. While your credit will never be perfect until the bankruptcy drops off your credit history, you still may gain a few points by having your score recalculated against a different group of consumers.
Paving the Way for Credit Repair
After filing for bankruptcy with the help of a bankruptcy attorney Orange County CA, you should have a better chance of successfully rebuilding your credit through proven credit repair tactics. Without old debts hanging over your head, you can get a fresh start. Set a budget for yourself and then use credit wisely to achieve your goals. One step that many bankruptcy filers take is to get a secured credit card after bankruptcy. A secured credit card is backed by a deposit that you make to the lender. That way, if you don’t make your monthly payment, they can take it out of your deposit. After performing well with a secured card, you can graduate to a regular credit card and continue repairing your credit.
With time, patience, and good money management skills, you can take the second chance offered by bankruptcy and end up with good credit again.
