Filing Bankruptcy: What Happens to My Credit?
Filing for bankruptcy is an important decision. Understandably, you have questions about how it will impact your financial history. While bankruptcy does affect your credit at the start, it may be the smartest solution for your long-term financial health.
A Clean Slate
Your current credit is most likely not in the greatest shape if your level of debt has led you to consider filing for bankruptcy. It’s a guarantee that allowing debts to go to collections will continue to negatively impact your credit.
Your credit score will most likely drop by a couple hundred points if you decide to file, but keep in mind that bankruptcy may actually prevent your credit score from dropping further. Through Chapter 7 bankruptcy, you can wipe your financial slate clean, breathe a sigh of relief with your fresh start, and begin to rebuild.
The Big Picture
While Chapter 7 bankruptcy will remain on your credit for a period, your overall credit score has already been adversely affected due to an inability to pay your debts.
During the years following bankruptcy, you can take initiative toward improving your credit by establishing a healthy financial game plan:
- Take a hard look at your spending habits, create a budget, and stick with it, knowing that in time, your credit will begin to recover.
- Commit to paying off your remaining, post-bankruptcy debts (car, home, or college loans) on time before taking on new loans.
- Gradually begin to add “positive” credit to your history, such as manageable installment loans and secured credit cards. Don’t open up too many new accounts too quickly, but do begin building.
If you’re not sure whether bankruptcy is the right solution for you, a qualified attorney can help you weigh the pros and cons so you can move forward with the confidence that you’re making the best decision. For more information about bankruptcy and credit scores, contact us at 419-524-6682.
* We are a debt relief agency. We help people file for relief under the bankruptcy code.