Filing for bankruptcy is a decision that carries significant consequences, particularly regarding one’s credit score. This article aims to explore how bankruptcy affects credit scores, the duration of its impact, and strategies for rebuilding credit post-bankruptcy.
When you file for bankruptcy, it immediately reflects on your credit report and significantly lowers your credit score.
This drop in score is due to the fact that credit scores are designed to predict your risk of defaulting on debts, and bankruptcy is essentially a declaration that you can’t meet your debt obligations.
The extent to which a bankruptcy filing affects your credit score can vary. Those with higher credit scores might see a more significant drop compared to someone with a lower score. For example, a person with a credit score of 700 or above might experience a sharper decline than someone whose score is around 600.
The type of bankruptcy you file can also influence the extent of the impact. A Chapter 7 bankruptcy, which involves the liquidation of assets to pay off debts, can stay on your credit report for up to 10 years. Chapter 13 bankruptcy, which sets up a repayment plan, typically remains on your report for up to 7 years. The longer the bankruptcy stays on your report, the longer its potential impact on your credit score.
While the most significant impact of bankruptcy on your credit score occurs shortly after filing, its effects can linger for years.
Over time, the impact of bankruptcy on your credit score lessens. This gradual recovery can be attributed to the aging of the bankruptcy information and the addition of positive credit activities post-bankruptcy.
Several factors can influence the speed of credit score recovery post-bankruptcy. These include:
At Blue Bee Bankruptcy, our lawyers are highly experienced in bankruptcy options. More importantly, we understand that each case we receive is unique and each client has different needs and goals. We will discuss these signs with you and decide the best route to take.
We strive to help our clients rebuild their lives and take steps toward a better financial future through filing.
If you’re dealing with the potential of bankruptcy, give us a call. Our team will work to help you by reviewing all of the options our firm has available. We will ensure you’ll get the best possible outcome for your situation.
Get in touch today so we can start working on either halting bankruptcies or preventing them from taking place altogether!