Many people believe filing for bankruptcy is a negative financial move, leading to poor credit and a nigh-insurmountable fiscal challenge. Connecticut residents should be aware that a Chapter 7 filing does not have the long-lasting effects that films might have one believe. In fact, it can be one of the most financially responsible decisions an individual or company can make.
While a bankruptcy filing will stay on a credit report for seven years in total, the impact on an individual’s credit score can be less far-reaching than the total might suggest. In many cases, an individual who files for bankruptcy can see an improvement in his or her score inside of two years — up to a credit score of 640, enough to qualify for many types of loans. While those loans might initially be more costly, the price can drop rapidly as time goes on.
For example, a loan for a car totalled at $15,000 might carry an interest rate of some $2,000 in the year following a bankruptcy. However, after two years, the charges can drop to as low as $800. Of course, it is important for the individual in question to work to maintain a positive credit score by keeping up on payments and ensuring sound practices for credit improvement. Even mortgages fall into this category, with lower interest rates the farther a bankruptcy is in the individual’s past.
Chapter 7 bankruptcy can sound like a daunting and concerning step. However, some Connecticut residents already know that such a filing is not the end of the world. In working toward a more positive credit score without the specter of debt hanging over them, an individual or company can recover quickly from bankruptcy and re-enter the financial world on a stronger footing.
Source: consumeraffairs.com, “Bankruptcy Makes Loans More Expensive, But Not Impossible“, Mark Huffman, March 27, 2018