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Chapter 13 bankruptcy and rebuilding credit

One of the paradoxes of modern finances is that too much credit card debt can be disastrous, but a little bit of credit card debt is considered a sign of financial health. Many people struggle to get out from under debt, but they would like access to credit when they need it.

Chapter 13 bankruptcy can help Tennessee residents shed old credit card debts, but it can also interfere with the ability to be approved for a new line of credit. This credit could be important if the consumer needs to make an important purchase. There is a type of credit card, known as a secured credit card, that can help people after a bankruptcy filing, but these can be hard for some people to get.

Chapter 13 shields consumers from their creditors while they pay off their debts through a schedule of manageable payments. Concluding the process usually takes three or five years.

The bankruptcy court calculates the amount of these regular payments according to the consumer's income and expenses, and there is typically not a lot left over with which to pay off any new credit cards. At the same time, filing for bankruptcy - and all the difficulties that led up that point - can hurt a consumer's credit rating. For these reasons, credit card companies may not want to approve new cards for those who have just filed for Chapter 13.

The good news is that these setbacks are temporary. As consumers work their way through the Chapter 13 process and pay down old debts, they will likely see their credit scores rise.

Tennessee attorneys with experience in Chapter 13 bankruptcy can help clients manage their bankruptcy with an eye toward re-establishing credit. Personal bankruptcy can be adapted to many different types of situations on the road back to financial health.

Source: Fox Business, "During Chapter 13 Bankruptcy, Secured Cards Tough to Get," May 6, 2014

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Mark T. Young & Associates
2895 Northpoint Blvd.
Hixson, TN 37343

Toll Free: 888-376-0282
Phone: 423-933-1606
Fax: 423-877-0363
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