However, one must always keep in mind that a high credit score does not inherently equate to easy access to loans, as the current lending climate is more important than any single factor in this regard. In 2005, it appeared that anyone with a heartbeat could obtain financing for a 4,000-square-foot California McMansion. A person with a credit score of 750 and 20% equity in a Bay Area property may find it difficult, if not impossible, to refinance a mortgage today. Why? The answer has nothing to do with the individual's credit score and everything to do with mortgage lenders' response to the consequences of their own negligence in extending credit.
However, apart from credit scores, bankruptcy does have its benefits. First, creditors' intrusive phone calls must cease immediately. Our Fremont and San Francisco Bay Area bankruptcy attorneys can explain your options and how much debt you may be able to discharge through bankruptcy. In addition, an experienced bankruptcy attorney can explain how to reestablish and enhance credit following a bankruptcy filing. While it may be more difficult to obtain credit cards or other loans for a period of time, bankruptcy can provide a fresh financial start and improve a person's credit score in the long term. The majority of bankrupt individuals can still obtain a secured credit card, which is one of the best methods to begin rebuilding credit.
When confronted with a mountain of debt, receiving a discharge through Chapter 7 bankruptcy can go a long way toward restoring a person's financial independence. Chapter 13 may be a viable option if you do not qualify for Chapter 7, either because you have sufficient income after monthly living expenses to pay a portion of your debt or because you have more assets than you would be permitted to retain in Chapter 7. Instead of a relatively swift discharge of debt, Chapter 13 offers a partial or complete discharge of remaining debt, but only after the debtor has fulfilled the terms of a payment plan.
Once your bankruptcy case has been discharged, your credit will almost certainly only increase. The financial management courses mandated by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) typically instruct debtors on two methods for reestablishing credit after bankruptcy: obtaining a secured credit card, as described above, or purchasing a used vehicle from a dealership that will finance nearly anyone. Moreover, if an auto loan is reaffirmed in a Chapter 7 bankruptcy, the lender will typically report future on-time payments to the three credit reporting agencies (CRAs).
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