Prior to filing for bankruptcy, you may wonder, “Is this going to affect my credit score?” or “How long does a bankruptcy stay on my credit?” To make an informed decision about your financial situation, it helps to know how bankruptcy will affect your credit card debt and credit score. The short answer is, yes, bankruptcy will impact your credit score. But there are ways to re-establish good credit.
How Long Does Bankruptcy Stay On Your Credit? – Chapter 7 Bankruptcy
Chapter 7 Bankruptcy can eliminate your unsecured debt without the need to repay creditors. “Unsecured debt” is any debt that does not involve property, such as a house or a vehicle. Chapter 7 bankruptcy can help you discharge debt such as credit cards, medical bills, unsecured loans, rent on prior apartments, amounts due on vehicles that have been repossessed or returned, and unsecured bank loans.
Chapter 7 is for people who are in debt with little to no disposable income. It’s a way to eliminate credit card debt and to rebuild finances without the burden of overwhelming bills. To qualify for Chapter 7, individuals must first pass a federally mandated means test.
How Long Does Bankruptcy Stay On Your Credit? – Your Credit Score
A Chapter 7 bankruptcy is an opportunity for a fresh start, financially speaking. But it will impact your credit. A bankruptcy stays on your credit report for 10 years. It can also impact:
- Your Credit Score. After filing for Chapter 7 bankruptcy, your credit score may fall between 100 to 250 points. That number may be higher, depending on your credit score prior to the bankruptcy.
- Future Credit Applications. Once you’ve filed for bankruptcy, it could be quite challenging for the next few years to obtain a home loan, car loan, or a new credit card. However, you may be able to obtain an FHA-insured mortgage, as long as two years have passed since the bankruptcy petition and you’ve re-established good credit.
- Future Interest Rates. If you are approved for a credit card or a house or car loan, you may have to pay higher interest rates until you rebuild your credit. Some lenders may also ask for a co-signer.
How Long Does Bankruptcy Stay On Your Credit? — Road to Credit Recovery
You can begin to restore your credit score within a few months, as long as you’re on your best financial behavior. Start with a secured credit card, such as a department store, credit union, or small bank credit card. “Secured” means that you’re putting the money up ahead of time, and that serves as the credit you draw upon. Once you have the new credit card, be sure to keep the balance low. Aim for 25% of your credit limit and don’t splurge or max out the card while you’re in recovery mode. Also, make sure that you make every payment – on time – every time.
Have Additional Questions? Contact the Bankruptcy Experts at Burrow & Associates
If you are concerned about filing for bankruptcy and how it may impact your credit, you should consult with an experienced bankruptcy attorney to determine the best choices for you. If you are currently facing significant debt and want to explore your options, please contact Burrow & Associates at (678) 323-2394 or via our website to set up a free consultation.