Life after bankruptcy may be easier than you think

Bankruptcy law offers important protections to individuals who are struggling with unmanageable debt. A successful Chapter 7 or Chapter 13 bankruptcy will discharge most consumer debts - including credit card debt and medical bills - and can provide debtors with the invaluable opportunity of starting over with a clean financial slate.

Despite this, many people who qualify for bankruptcy never seek it. Often, it is because they have misconceptions about the bankruptcy process and are fearful about what life after bankruptcy might look like.

In reality, it doesn't take nearly as long as most people think for things to return to "normal" after filing for bankruptcy. Here are some answers to some of the most common post-bankruptcy questions that bankruptcy lawyers encounter.

Is my credit score ruined forever?

It is true that bankruptcy will cause a person's credit score to drop. However, it is likely that the effect of not filing for bankruptcy would have been much worse, as unpaid debts, late payments and collection actions can all do significant damage.

The good news is that the impact of a bankruptcy will lessen over time, and credit can be rebuilt in less time than you think. Most experts recommend reestablishing credit by getting a new credit card, charging a few small expenses each month and then paying the bill in full every month.

Will I ever be able to buy a home?

Depending on the nature of the case, a bankruptcy filing will usually stay on a person's credit report for between seven and 10 years. But, this doesn't mean that it will take that long to qualify for a mortgage.

Mortgage availability depends both on the lender and the type of bankruptcy. For example, Federal Housing Administration-backed loans start to become available one year after payments in a Chapter 13 reorganization start and two years after a Chapter 7 liquidation has concluded. Freddie Mac and Fannie Mae have slightly longer waiting periods in their guidelines. Every lender will require borrowers to demonstrate that their credit habits have improved since the bankruptcy.

Despite these waiting periods, some lenders might be willing to show some flexibility if the bankruptcy was related to extenuating circumstances like a serious illness, divorce or death in the family.

What if I end up back where I started?

In many ways, bankruptcy provides individuals with a chance to make a clean start. However, it is important to recognize that some debts - like student loans, child support and tax debts - are nearly impossible to discharge. If non-dischargeable debts are part of your financial picture, you'll want to work out a budget that allows you to meet those obligations without causing you to rely on credit cards to pay your other expenses.

Working with an experienced attorney

No matter what your situation - or your fears - an experienced bankruptcy attorney can work with you to create a plan that will address your financial issues and help you meet your long term goals. If you're struggling to pay your debts, it is worth it to schedule a consultation with a bankruptcy attorney in your area.