How will bankruptcy affect my credit score?

On Behalf of | Jan 17, 2023 | Bankruptcy

Few people manage to survive on cash alone. Most rely on their credit score to borrow money.

A good credit rating can help you do a lot of things. For example, buying a home, starting a business, paying for medical treatment or mending the car so you can get to work.

Failing to keep up with your debt payments will damage your credit score. Yet many people who should consider filing for bankruptcy don’t do it precisely because they are scared it will harm their credit rating.

It’s true that bankruptcy will harm it, but not doing so could harm it for longer

If you cannot pay your debts and have no realistic prospect of being able to pay them, your credit score will only worsen. Unless you suddenly inherit a large sum or find some other miraculous source of money and can pay the debts in full, that won’t change.

When you file for bankruptcy, you get a fresh start

If you use a Chapter 7 bankruptcy to clear your debts, the credit raters will dock you points, but then you can build it back up. The sooner you file, the sooner you can start to rebuild your score.

You can do this in several ways

As soon as a court accepts your bankruptcy and discharges your debts, you can apply for loans and credit cards. Some lenders specialize in offering these products to people who have gone through bankruptcy. You won’t get as good a deal as before, but paying things back on time will help you show that you are responsible, and little by little, you will see your credit rating rise.

Seek legal help to understand more about how bankruptcy works.