How Does Bankruptcy Affect my Credit?
Most often, the biggest deterrent from people filing bankruptcy is the negative affect it has on one’s credit. Not only does it have immediate short-term consequences, but lasting long-term ramifications as well. While these negative impacts don’t seem very reassuring to those considering bankruptcy, the alternative of letting your debts pile up will also have drastic and long-lasting negative affects as well.
So what exactly should you expect to see as a direct result of filing for bankruptcy? Initially you will see a dramatic drop in your credit score. Depending on the type of bankruptcy you file for, you could see your credit score drop between 160 and 220 points. This drop could easily move you from a good credit standing to a fair or poor one. Additionally, as lenders use your credit rating to make a decision on granting new loans, this could also mean that it’ll be much more difficult to be approved for new home loans, credit cards, or car loans.
You should also expect your bankruptcy filing to remain on your credit report for an extended period of time. Filing for bankruptcy does provide for a financial fresh start, but to fully come out the other side of bankruptcy, it may take years. The amount of time a bankruptcy filing stays on your credit report depends on the type of bankruptcy you file.
For example, filing a Chapter 7 bankruptcy will remain on your credit report for up to 10 years, whereas filing a Chapter 13 bankruptcy will only stay for up to 7 years. However, with a Chapter 7 bankruptcy, though your bankruptcy itself stays on your report longer, the debts that are discharged through Chapter 7 will come off sooner. In a Chapter 13, the debts are generally reorganized into smaller, but longer payments, therefore those debts may even be on your record longer than the Chapter 13 filing itself.
So what can you do to overcome these credit challenges after bankruptcy? The best thing to do is simply be diligent about making strides towards better credit. It’s common to see credit scores take a quick dive after bankruptcy or numerous financial missteps, however to see a score improve as quickly is very unlikely. Your first step is to begin establishing credit again. This can be dangerous and tempting for those fresh out of bankruptcy court, but showing a commitment to paying off debts will help to improve your credit after bankruptcy.
If you’re considering bankruptcy, and want to discuss the possible implications based on your specific situation, contact our office to sit with an experienced bankruptcy attorney. We can be reached at (702) 998-1188, info@ljlawlv.com, or by scheduling a consultation online.
For more information regarding bankruptcy and other related topics, check out our bankruptcy blog, and Bankruptcy TV playlist on Youtube.