Trusted New Jersey Bankruptcy Attorney
I was once again interviewed by Karin Price Mueller for her NJMoneyHelp.com column. One of Ms. Price Mueller’s readers asked this question. My daughter was out of work during the pandemic — thank god for unemployment — but she accumulated $20,000 of credit card debt. She still has a high credit score and she’s on her own financially now and working. With interest rates rising, it will take her a really long time to pay it all off. Is she better off filing for bankruptcy? She wants to buy a house in the next five years so she’s not sure what’s worse — taking forever to pay off this debt or trying to get a mortgage with bankruptcy. Anything you can advise?
Chapter 7 Can Improve Your Credit Score
While you can read the entire column here, most people can get a mortgage after bankruptcy. But they must take the proper steps. Generally speaking, because I do not have all of the facts about this person, the first step is getting your credit score back to an acceptable level. As I say in the article: “As soon as you file your bankruptcy case, your credit score will see a 150 points negative hit. However, in my experience, clients who do the right things to rehabilitate their credit — such as making their mortgage, rent, or car payments on time, paying any [post-bankruptcy loans or revolving lines of credit] in full before the end of the month — after their bankruptcy is discharged, will find that within two years of filing the bankruptcy case they are eligible for a conventional mortgage.”
The good news is that the 150-point negative hit will almost always be completely turned around within four months from the bankruptcy filing date. Consequently, a bankruptcy filer can, and usually will, see an improved credit score. This is one of the major myths about bankruptcy – that your credit will be destroyed by bankruptcy. Too many people think that they cannot recover from bankruptcy.
If you have more questions about the bankruptcy process and qualifying for a mortgage, I am happy to answer them. Likewise, contact Lucid Law if you are facing financial hardship and need help.