While bankruptcy is often a fresh start for debtors it is not free from consequences for your credit score rating. Prior to filing for bankruptcy it is essential that consumers fully understand their legal position and obligations and the effect of bankruptcy on their credit report. Bankruptcy should be considered only as last resort as it could have a major impact on your credit score rating and if possible, a bankruptcy alternative should be considered.

Filing A Bankruptcy: Credit Report After Bankruptcy

It is essential that consumers understand that bankruptcy is an extremely serious financial situation brought upon a creditor either voluntarily or involuntarily. Either way bankruptcy affects your credit report dramatically. Once you have been declared bankrupt, although you may feel that you are relinquished of your debt obligations, bankruptcy brings with it a whole new string of issues and your credit report after bankruptcy may not paint a pretty picture. Filing a bankruptcy credit is a public record and hence stays on your credit score rating for a period of 10 years or more. The effects of bankruptcy on your credit report may be summarized as follows:

• Filing a bankruptcy is viewed as extremely negative by credit providers. This is considered the worst kind of adversity on your credit report and even supersedes delinquencies and accounts in collections/judgments.
• A bankruptcy on a credit report makes obtaining credit through major channels extremely difficult as lender look at bankruptcy credit clients unfavorably.
• A bankruptcy credit charge on your credit report could lower a good credit report score rating by 100 points or more.
• In the event of filing a bankruptcy all debts are not discharged.
• It is important to understand your debt obligations in the event of being declared bankrupt. Debts such as taxation obligations, student loans, child support and alimony are not discharged. The payments on these obligations need to be made or they will further adversely affect your credit score report.
• Consumers with a bankruptcy credit report may be able to obtain credit through sub-prime channel/non-conforming lenders but this is usually at a very high interest rate and that in turn means you are spending a lot more money.

Fresh Start Bankruptcy

Once a consumer has been declared bankrupt, it is regarded as a fresh start for them and this is known as a fresh start bankruptcy. The consumer with bankruptcy on their credit should now focus on rebuilding their credit report. Although this is a long and tedious process it can be done.

• One way to start is by obtaining small secured amounts of credit and making regular and timely repayments and focusing on paying it back as soon as possible. This will help show good character on the part of the bankrupt consumer.
• Another vital tip is for consumers with bankruptcy on credit reports to obtain their credit score ratings regularly and monitor their progress.

Alternatives To Bankruptcy:

As stated earlier, bankruptcy must be treated as a last resort and consumers should consider all possible bankruptcy alternatives before filing for a bankruptcy. A few possible alternatives to bankruptcy are:

• Managing Your Own Finances: If you feel like you are coming under undue and increasing financial pressure and you money managers are not coping with your changing situation, it might be time to roll up your sleeves and take control of your finances before you end up filing a bankruptcy.
• Debt Mitigation/Restructuring: In the event that you feel you are unable to cope any further with your debts, talk to your creditors and negotiate with them an amount they will accept in return for forgiving a portion of your debt without demanding a bankruptcy on your credit report. Most financial institutions are willing to provide their customers with debt mitigation services.
• Consolidation: Debt consolidation is a powerful tool in managing your debts. This allows consumers to roll all their debt into on facility and make one larger repayment instead of numerous smaller ones and often prevents bankruptcy on credit reports from appearing.
• Filing Chapter 13: This is another powerful tool or bankruptcy alternative which is available to US consumers struggling with their debt obligations. Chapter 13 Wage earner plan is an arrangement which usually lasts for a period of 5 years. The funds earned by the consumers are distributed among the creditors. This could save a person from declaring bankruptcy.

Filing a bankruptcy is a major setback for credit score ratings and therefore it cannot be reiterated enough that a consumer must think seriously before filing for a fresh start bankruptcy. However if you do, your next course of action should be concentrating on removing bankruptcy on your credit report and rebuilding your credit score rating.