People file bankruptcy for many reasons. Some have debts that spiraled
out of control. Others may have had one large debt, like a mortgage or
a hospital bill, that they may not have been able to pay. No matter the
reason, one thing is the same for all bankruptcy debtors: Your credit
score will change after a bankruptcy.
On your credit report itself, there will be a notation of the date of your
bankruptcy and the type of bankruptcy case. This notation will remain
on the credit report for 7-10 years. How the bankruptcy will affect your
credit score depends on your credit prior to the bankruptcy and whether
you filed a Chapter 7 or Chapter 13 bankruptcy case.
If you had relatively good credit previously to your bankruptcy, your credit
score will take a dramatic hit. It is not uncommon for a credit score
to drop by hundreds of points in the months after a person files for bankruptcy.
If you had poor credit before bankruptcy due to numerous unpaid debts,
your credit report may not look much different. The minimum FICO score
is 300, so a person whose credit rating was previously in the 400-500
range does not have much room to go lower.
As a result of this drop in credit score, you will likely have trouble
getting any new credit. In most instances, you will not be approved for
a credit card, auto loan, or mortgage without the help of a co-signor.
Even then, it may be difficult to open new credit lines for at least six
months to a year after you first file for bankruptcy.
Slowly, however, your credit score will recover. In the first year or two
after your bankruptcy you will eventually qualify for a secured credit
card that can help you build up your credit score. By responsibly using
credit during the years following the bankruptcy, your credit score will
soon approach reasonably good levels.
In the years following the bankruptcy, people who have not gotten into
trouble with debt by making late payments or defaulting on a loan will
almost always see their credit score climb. In many cases, a debtor’s
credit score will reach—if not surpass—their pre-filing credit
scores well before the bankruptcy case is removed from the credit report.
However, if a person does have problems with new debts the fact that the
bankruptcy is still reported on the credit report will only work to decrease
that person’s credit score. Lenders will view the previous bankruptcy
and the new debt problems as a sign that the potential borrower is not
Bankruptcy cases provide debtors with the perfect opportunity for a financial
fresh start. Debtors who commit to making a change in their financial
habits will find themselves more creditworthy than ever before within
several years of their bankruptcy discharge.
If you are considering filing for bankruptcy, Loan Lawyers can help. Our
experienced South Florida bankruptcy attorneys can review your financial
situation and help you create a way to get out of debt. For a free consultation,
contact Loan Lawyers today by calling (888) FIGHT-13 (344-4813).