If you are considering filing for bankruptcy, you may be wondering…

How does filing bankruptcy affect my credit?

That is a great questions, and one that we get asked all the time.  The simple answer is, filing bankruptcy will significantly impact your credit score.  However, the question is not really that simple to answer.  If your credit score is high, a bankruptcy will drastically lower it.  On the other hand, if your credit score is already low due to late payment and large unpaid debts, bankruptcy may have a slight negative effect, but the benefits may outweigh the cost.

What to expect when you file for bankruptcy

1.   Bankruptcy will stay on your credit report for a long time.

If you decide to file, you will likely file a Chapter 7 or Chapter 13 bankruptcy. A Chapter 7, which essentially wipes the slate clean and eliminates all of your debt, will remain on your credit report and potentially affect your credit rating for 10 years; a Chapter 13 will remain for seven years.

2.   Bankruptcy will lower your credit score

Once you file for bankruptcy, you may see your credit rating drop anywhere from 80 to 220 points.  I know that is a big range, but as I explained before, bankruptcy does not affect everyone the same. The higher your score is before the bankruptcy, the more points you will lose.

Another surprising fact is that, your credit score is not only affected by what you do.  When determining your credit score, your information will be compared against others who have filed for bankruptcy.  It’s crazy but true!

If you don’t know what your credit score is, you can check it for free at www.creditkarma.com

3.   You will be stuck with some of your debt

Even if you file a Chapter 7 bankruptcy, some debts are still protected.  Except in extreme circumstances, you will still be required to pay student loans, child support, and tax debt. If you are behind on these payments, your credit rating may drop an additional 70 to 120 points.

4.   You can improve your credit score

Within a year or two, you may be able to get your credit rating above 700. Paying all bills on time will greatly help to improve your score. Another suggestion is to use a secured credit card to build your credit.  Apply for a secured credit card, use it regularly and pay off the balance each month.  This will add positive marks to your credit report to start balancing out the negative. 

The bottom line is, bankruptcy should only be used as a last resort.  If you are overwhelmed with debt, there are programs out there to help you such as Debt Consolidation and Debt Settlement.  Both of these options will help you get out of debt fast and save you money in the long run. 

If you have questions about whether bankruptcy is the right choice for you, give us a call at 1-877-492-4109 or click on the link below for a FREE CONSULTATION with one of our Debt Solutions Specialist. 

NO!! Stop!  Don't do it. . . .you'll regret it!  After filing for bankruptcy, you will be wailing like the witch from Wizard of Oz, "No. . .I'm melting. . .aaaaa!"

Although bankruptcy gives you a reprieve from your current bills, it will be on your credit report for 10 years.  Now, ask yourself this, would you rather have a ding--or rather a huge dent--dogging you for ten years or a small ding for two to three years by using Debt Consolidation or Debt Settlement programs?  Hold that thought while we take a trip into understanding a bankruptcy vs. debt consolidating and debt settlement programs and their affect on your score.

Bankruptcy And Your Credit Score:

In the latest report by the National Bankruptcy Research Center, there has been a slight decrease in bankruptcy filings as people are slowly pulling themselves out of the economy dump.  It also states that this year's first eight months have seen a 10% drop.  That is a start, but the national average shows that one out of 285 people are still filing to get the debt out from under them.  FICO has recently made available examples as to how many points a bankruptcy can actually have on your credit rating:

• Ironically, those that have a very high score can have a significant drop, indicating not even a dent, but a train wreck--could be 240 points or more
• Those who are already having problems with their debt may have just a dent--could be as low as 130 points

Even after filing, lenders require at least two years before applying for credit again.  They do this to give the person the time to begin rebuilding their credit.  Don't be a statistic.  Bankruptcy will only tell future lenders that you failed in meeting previous creditors' requirements.  There are better options. 

Debt Consolidation and Settlement Programs And Your Credit Score:

• Debt Consolidation is a combining all of your debt into one lower monthly payment.  You will generally get a smaller monthly payment, lower interest rate, and few if any fees.
• Debt Settlement Programs work with your creditors to settle the balance for less than owed. (Most of the time less than HALF of what you owe!)

Your score is affected, yes.  However, the score is far less affected than if you were to file bankruptcy, or do nothing.  Ten years is a long time to be haunted by bad credit.  In the two years it takes to apply for credit after filing bankruptcy, you can have your credit score back on track with Debt Consolidation and Debt Settlement programs.

For more information on your options, click on the link below or call 1-877-492-4109

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