The tough economy that has plagued recent years has led many in New Jersey to decide that bankruptcy is the best choice to recover financially. One of the most preferred forms of filing is Chapter 13. As consumers consider filing for bankruptcy, some hesitate due to the potential reduction in their credit rating that will occur once the bankruptcy is complete. However, at least one authority notes that the damage to a credit rating may be short lived in some instances.
In particular, a filing of a Chapter 13 bankruptcy in New Jersey may only limit the ability for a person to apply for a new mortgage for as little as a year. After a Chapter 13 bankruptcy is discharged, mortgage companies have found that lenders will allow an individual to seek refinancing quickly because of the fact that under this type of petition many of the consumer debts are at least partially repaid. The shorter time exists despite the fact that a bankruptcy filing can remain on a credit report for seven to ten years.
Filing for a Chapter 13 bankruptcy can cause a New Jersey consumer to see their credit rating reduced by a significant amount. However, after the bankruptcy is discharged, the rating can increase at a fairly quick pace. This is particularly true on the case of a Chapter 13 because lenders see the filing as more responsible than other types of bankruptcy, one authority says. After the bankruptcy process is complete, consumers also can get secured lines of credit, which when well managed, can help improve credit ratings quickly.
Filing for a Chapter 13 bankruptcy is a difficult decision for anyone who chooses to seek the protection offered. In many cases, the bankruptcy filing is the best choice for consumers because of the imbalance between their debts and assets. In such cases, the fresh start offered by a bankruptcy may outweigh the hit to a credit rating that may occur. Because every consumer’s financial situation is different, they may benefit from taking time to investigate all the options that are available and choosing the one that is right for them.
Source: CNBC, “Mortgages: Life After Bankruptcy,” Vickie Elmer, Sept. 17, 2012
