St. Louis Bankruptcy Will Allow Your Credit Score To Improve Dramatically

When I do an initial consultation for a St Louis bankruptcy, the most common statement I hear from my clients is some version of the following: “I know that I need to file for bankruptcy, but I hate it, because I also know my credit score is gonna be destroyed as a result.” But this is simply not true. In fact, it would be far more accurate to state that the filing of a bankruptcy will drastically improve your credit rating (in a relatively short period of time). How is this possible? Please do read below to learn more!

There is a pretty widespread assumption in our society that if you file a St Louis Missouri bankruptcy, you are consigning yourself to a life of horror. A life in which you will never again be granted a line of credit, in which your credit rating tanks to all-time lows, and in which you will never recover. But the exact opposite is true. A bankruptcy in the state of Missouri is described as a “fresh start / clean slate”. It is a chance to wipe the slate clean of all your unsecured debts, start fresh in life, and rebuild.

And the rebuilding part is rather easy. Why? Because once all of the unsecured creditors that have been weighing down your credit score (such as credit cards, medical bills, payday loans, and collection agencies) are discharged by the court, then your credit score will take off!! For instance, most people can expect to see their score rise by as much as a hundred (100) points within the first year after filing. And then within about a year-and-a-half to two years after filing, you can reasonably expect that your score will have risen back up to where you really want it. So obviously I’m not talking about something that will happen overnight (indeed, it will take a bit of time before your score starts to climb back out of the depths). But this rebuilding process occurs way sooner than what most people had been lead to believe.

So why is this the case? Why are so many people convinced that by filing a Missouri bankruptcy, their credit rating will not only tank, but that it will for sure never recover? I think there are three main reasons for why we see this phenomenon. The first reason for why people have this misperception about bankruptcy is pretty straightforward: creditors have done a really good job of convincing folks that filing a bankruptcy is the same thing as financial suicide; that people who file for bankruptcy will never be able to recover; that they will never again be deemed a worthy candidate for a line of credit (whether it be in the form of a car loan, a home mortgage, or a simple credit card). And when you hear this kind of thing from an entity that is an expert in its field, it can be disheartening. Fortunately, I don’t hear as much of this anymore. Most creditors nowadays recognize that telling falsehoods about a specific area of federal law is not a good idea.

But that will certainly not stop your friends and family from telling you all about the horrible stories they have heard (from their mother’s, girlfriend’s, house cleaner who had an old boyfriend who said his uncle filed for bankruptcy 20 years ago, and he hasn’t been okay since)!! And this is the second main reason why people are convinced that bankruptcy is bad. Over the years, I have had many clients tell me stories about how someone they knew was screwed when they filed for bankruptcy. But usually upon further investigation, it turns out that the “story” they heard was second- or thirdhand (and almost none of the information is accurate).

But I think more importantly, the third reason for why there is so much confusion and misperception is because of the law itself. In 2005, the US Congress passed a bankruptcy reform bill that completely overhauled the way in which bankruptcies were filed. One of the new rules imposed by this law stated that if you file a Chapter 7 bankruptcy (this is the chapter of bankruptcy in which all of your unsecured debts are discharged), you may not file another Ch7 until a full eight (8) years has passed. That may seem pretty straightforward on its face to most. But somewhere along the way, people become horribly confused as to the meaning. And before you know it, folks started to believe that “you can’t get your credit back for another eight years!! So I’m not filing anything!” Fortunately, this is not the case at all. But as a result of this misinformation, I have had many interesting conversations over the years!

So why would your credit score grow at all? Wouldn’t the bankruptcy actually depress your score? Because once you receive an official discharge from the court, you will overnight become the most attractive candidate in the world to creditors!! Why? Because since all of your old debt has now been wiped out, you will presumably be in a perfect position to make monthly minimum payments on a new line of credit (like a new card of a personal loan). Most people do not want to run right out and get new credit cards after filing for bankruptcy! But in all honesty, it is a good way to increase your credit score a bit more quickly (so long as you have the discipline to stay focused on using it as a tool to rebuild your credit rating, and not allow yourself to fall back into old patters of behavior).

All of the above information also applies to a Chapter 13 bankruptcy. In a Ch13, you enter into a repayment plan over the course of three (3) to five (5) years. During this period, certain debts are paid back (things like back child support, high interest car notes, mortgage arrearage, and tax debts). Sometimes a portion of your unsecured debts are paid back inside a Ch13. But whatever amount is left unpaid at the end of your plan is discharged. So if you think about it, a Chapter 13 is a fantastic way in which to improve your credit score. Why? Two main reason: 1) We are talking about 36 to 60 months’ worth of on-time payments to the Bankruptcy Trustee (who disperses the funds to your various creditors); 2) As mentioned above, the goal in a Ch13 is to pay back only a small portion of your unsecured creditors (and once the rest of those creditors are discharged at the end of your repayment plan, your score will rocket upward).

But the best way in which to learn more about the process of bankruptcy (and how it effects your credit score in a positive fashion) is to set an appointment to come and see us!! We offer free initial consultations during which we will answer all your questions, and get you moving in the right direction. All you need to do is give us a call (or shoot us a text, or send us an email). We look forward to hearing from you!!

At The Bankruptcy Company, we want to make sure that you receive the very best bankruptcy services in all of the St Louis Missouri area. Our team will get you back on your feet, help to dramatically improve your financial standing, and put you in the best position possible for the future. The attorney fees for a standard St Louis MO Chapter 7 are $675, and the upfront fees for a St Louis MO Chapter 13 are $300. But the initial consultation is free of charge!!