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Bankruptcy & Credit Score Concerns

What impact will bankruptcy have on my credit report?

For every person who actually declared bankruptcy, there are many more who desperately need this type of debt relief but who hesitate to take action because they fear that by doing so they would destroy their credit score. Out of concerns over their future ability to buy a house, to take out a car loan or to use credit cards and lines of credit, they continue to struggle on under an unsupportable burden of debt. While it is true that filing bankruptcy may have a negative impact on your credit score, this is not always the case.

Bankruptcy Can Actually Improve Your Credit

Yes, you read that right: By declaring bankruptcy, you might actually see a boost in your credit score. If you're at the point where bankruptcy is on your horizon, your credit is probably already suffering from a high debt-to-income ratio, a history of late payments, and records of charged off debts. Perhaps you are even in default on your mortgage. When your debts are discharged at the end of the bankruptcy process, your credit score may increase.

There is no way to predict with accuracy exactly what effect bankruptcy will have on an individual's credit report, but it generally depends on what the score was prior to the date of filing. If you have an otherwise excellent score – which is unlikely if you are considering bankruptcy – the impact will be far greater, whereas if your score is already low, you can expect less damage or perhaps even a boost.

Take Action Now to Safeguard Your Financial Future

One thing to keep in mind is that even if your credit is decent now, the longer you wait before taking effective action to handle your debt, the more likely it is that your score will fall in the future. Another thing to know is that the effects of bankruptcy are not permanent: A Chapter 13 bankruptcy will fall off your credit report after 7 years, while Chapter 7 or Chapter 11 will be removed after 10 years. Contact our Gainesville bankruptcy lawyers now at The Law Offices of Justin McMurray, P.A. to discuss your unique situation and to take the first steps in your case.

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