Have your debts become overwhelming? Having trouble making your payments on time each month? Filing for bankruptcy can help you take the weight of your financial burdens off your shoulders, but as you can imagine, it doesn’t come without its share of repercussions. If you’re considering filing for either Chapter 7 or Chapter 13 bankruptcy, you no doubt have questions and concerns about what might happen after the court discharges your debts. Below, Ron Lundquist, Attorney at Law, discusses a brief overview of what life after bankruptcy discharge entails.


Bid Your Debts Farewell

A bankruptcy discharge eliminates your liability for qualifying debts, such as medical debt, utility bills, credit card debt, and personal loans. When the court issues your Chapter 7 discharge, in most instances, your case will close shortly thereafter. In Chapter 13 bankruptcy, however, the court issues your discharge after you’ve successfully paid all qualifying debts under the terms of your payment agreement. Once your qualifying debts have been discharged by the court, creditors are permanently prohibited from collecting on those debts.  


What Happens to Your Credit?

Though filing bankruptcy will negatively impact your credit, it may not be to the extent you imagine. Depending on where your score is now, you should expect to see it drop, though that’s not always the outcome in each case. That said, once your debts are forgiven, rebuilding your credit becomes significantly easier.


Bankruptcy effectively eliminates the struggle of missed and late payments as it removes a substantial quantity of your overall debt; moreover, it reduces a high debt-to-income ratio, which naturally helps your credit score rise. If you’ve heard that bankruptcy will cause your credit to plummet and remain there for years, know this: Your individual outcome depends largely on how you handle your finances and payments over the coming months and years.


Spend Your Dollars Wisely

Managing your finances wisely and paying your bills on time can help your credit score rise quite quickly after a bankruptcy discharge. In some cases, a discharge can even raise your score because it substantially affects your debt-to-credit ratio, which determines approximately 30% of your score.


Credit Cards, Loans, & Mortgages After Bankruptcy

Acquiring new lines of credit after filing for Chapter 7 or Chapter 13 bankruptcy may present a challenge, but it’s not insurmountable. You may need to jump through a few hoops to qualify for credit cards—such as opening secured, deposit-based lines of credit—but once you establish a strong payment history, your score will naturally rise.


Your loan interest rates will also rise, but again, as your score increases, you can always refinance for a lower rate. Bottom line? Spend wisely, pay all your bills on time, and don’t make the same mistakes that brought you to your bankruptcy filing in the first place! Remain consistent, and you’ll be well on your way to financial stability in no time.


Considering Filing Bankruptcy? Contact the Law Office of Ron Lunquist Today

If your mounting debts are overwhelming, don’t hesitate to contact Ron Lundquist, Attorney at Law. I specialize in personal bankruptcy, foreclosure assistance, and business bankruptcy, and have been proudly serving Minneapolis and St. Paul residents for over 20 years. Navigating the bankruptcy process on your own can be confusing, even overwhelming, but when you place your trust in my hands, rest assured, I’ll help you take back control of your financial situation. To learn more about your bankruptcy options, contact my office at 651-454-0007 to get started with your complimentary consultation. Or, you can always feel free to reach out to me on my contact page.