Bankruptcy is a process that allows a filer to relieve overwhelming debt. These debts can include medical expenses, credit card debt and personal loans. After a successful bankruptcy filing, filers can be less burdened by their financial obligations. However, bankruptcy comes with a price — albeit a temporary one.
A filer’s credit score will drop after a successful bankruptcy filing and the bankruptcy will stay on their credit report for several years. A filer’s credit score can drop as many as 200 points. This can affect their ability to apply for credit cards and loans.
Yet, this is not a hopeless situation. In reality, most people are doing more damage to their credit reports by letting their debts accrue and go unpaid than by filing for bankruptcy. Filing bankruptcy gives them the chance to rebuild. Here are the basics you should know:
Will your credit score be affected forever?
A bankruptcy filing remains on a credit report for seven years if you file for Chapter 13 and 10 years if you file Chapter 7. However, the damage to your credit score may only last for a year or two if you manage to take the right steps after your bankruptcy is final.
What can you do to raise your credit score after bankruptcy?
There are many ways to increase your credit score quickly after bankruptcy. Opening up a “second chance” credit card or obtaining a secured card can allow you to show that you can handle credit responsibly. Some loans are also designed to help people rebuild their credit.
In some cases, you can add your utility bills to your credit reports and — by making the payments on time — use them to show your ability to manage your finances. Finally, monitoring your credit report and challenging any inaccurate information can also help. Most people see their credit scores recover within two years to the point where they can easily obtain loans and regular credit again.
If you’re suffering from the burden of debt, don’t let your credit score fears keep you from moving forward. Legal guidance can help.
