I am often asked how filing bankruptcy will impact a person’s credit score. My answer generally surprises people because my experience has been that filing bankruptcy doesn’t usually hurt a person’s credit. Here’s why.
Most people who file bankruptcy already have poor credit. Their credit report contains late payments, charged-off accounts, lawsuits, garnishments, repossessions, foreclosures, etc. Their credit is already dinged up enough so that they can’t borrow money at a decent interest rate. For these people, filing bankruptcy will do no harm to their already poor credit. In fact, filing bankruptcy very well may improve their credit score. Say what?! You heard me. Filing bankruptcy can actually help improve a person’s credit score.
Your credit report is largely wiped clean when you receive a bankruptcy discharge. Your high balances are removed as are any late payments or records of unpaid debts. And the accounts included in the bankruptcy will be marked as “Included in Chapter 7 Bankruptcy” or “Included in Chapter 13 Bankruptcy” depending on which type of bankruptcy you filed.
In the final analysis, your credit score alone shouldn’t affect whether or not you decide to file bankruptcy. “You have to be realistic about your ability to get back on your feet financially,” says credit expert Gerri Detweiler, author of The Ultimate Credit Handbook. If your debt payments are crushing you, bankruptcy will give you a much-needed fresh start. And if you pay your bills on time after bankruptcy, your credit score could be back in the 700s within two or three years.
If you’re struggling with debt problems and would like to know more about how bankruptcy may be able to help you, contact me today to schedule a FREE initial consultation. Just fill out the Contact Dan form on the far right side of the page and click the Submit button and I’ll get back with you as quickly as I can. I would count it a privilege to be able to visit with you in a relaxed and confidential environment where I’ll answer all of your questions in plain English and give you the straight scoop on the pros and cons of bankruptcy as related to your specific situation.
Source: SmartMoney.com
