Trusted New Jersey Bankruptcy Attorney

I was once again interviewed by Karin Price Mueller for her 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.

Have Questions?

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.