How Will Bankruptcy Affect My Credit?

Our Morris County Bankruptcy Lawyers Assist People with Debt

If you file for bankruptcy, your credit score may take a hit. However, the vast majority of people who are in need of bankruptcy the most generally have poor credit scores prior to filing. Defaulting on loans or mortgages, being late on utility bills or credit cards, having a judgment entered against you—those things will all negatively affect your score.

The good news for people worried about their credit scores is that bankruptcy can mark the beginning of a new financial life. Many who file for bankruptcy can improve their credit scores afterward, and for some, bankruptcy can be one of the quickest methods to do so.

How Much Will Bankruptcy Hurt My Credit Score?

The damage to your credit score upon filing for bankruptcy is difficult to predict. The effect largely depends on your current credit standing. If you have a high credit score, it is likely to take a drop upon filing for bankruptcy. The drop is often not as significant for those with lower credit scores. Both Chapter 7 and Chapter 13 affect your credit score the same way, and in most cases, bankruptcy will remain on your credit score for about ten years. Still, the exact effects will vary from one bankruptcy to the next depending on the specific facts of your situation.

When Can a Bankruptcy Help Improve a Credit Score?

Though filing for bankruptcy initially harms a credit score, it can serve as an effective method to rebuild credit. Missing payments accumulates debt, and harms a credit score. If an individual misses multiple payments and continues to fall further behind, that person’s credit score may worsen as the debt builds.

Declaring bankruptcy stops this cycle of debt accumulation and credit damage. Bankruptcy can eliminate some of these debts and provide a way to start over financially. In a Chapter 13 plan, you will establish a budget that you must stick to for three to five years. People who successfully complete their Chapter 13 plan will not only receive a discharge of debt in the end, but they will learn valuable tools to manage their money and budgets.

Once this individual emerges from bankruptcy free of debt, he or she can start to reestablish credit after bankruptcy. This can be done in a number of ways. Lenders will offer people with bankruptcy on their record debit cards, credit cards and secured loans. (Truthfully, people who finished bankruptcy may find they have many credit offers and must proceed cautiously.) After bankruptcy, the best way to rebuild your credit is to stick to your budget. By paying bills on time and not getting in over your head, your credit score should eventually rise higher than it was prior to filing bankruptcy.

Find Answers to Questions About Debt and Bankruptcy

Debt can become a never-ending cycle that continues to become more harmful over time. Debt piles up, late fees accumulate and eventually creditors begin harassing you, threatening legal action.

Fortunately, you can break this chain by talking to our Morris County bankruptcy attorneys. We will find the best solution for your situation, whether it involves bankruptcy or another debt-relief alternative. If you are facing severe debt, foreclosure or similar financial problems, our firm will work with you. Call Ast & Schmidt, P.C. today for free attorney advice about debt and bankruptcy.

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