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One of the primary concerns people have when filing for bankruptcy is whether or not doing so will affect their credit score.
The truth is it will impact your credit score and initially, that impact will be negative. However, and this might come as a surprise to a lot of people, bankruptcy ultimately helps you raise your credit score.
Putting off drastic action as your financial situation grows worse will result in a gradual decline of your score. The longer you fail to act the worse your score will get until it eventually bottoms out.
Your Credit Score Will Recover from Bankruptcy
By filing for bankruptcy, you’re causing your score to take a hit initially, but it gives you an opportunity to then begin improving your score. Bankruptcy will help the open accounts on your credit report that have late or missed payments, are over the limit, or have been sent to collections. Taking action, as drastic as bankruptcy might seem, creates a line in the sand from which you can move forward to a brighter financial future.
At the end of your Chapter 7 bankruptcy, your account balances will be listed at zero on your credit report. Any accounts that were in collections will be listed as “resolved,” and your less-than-favorable payment history will be eliminated. Instead, each debt included in your bankruptcy will be listed as “discharged through bankruptcy.”
The primary factor counting against you will be your bankruptcy. One single hit to your credit, showing future lenders that you took responsibility for your situation and did something about your debts.
Those who view your credit report will know you have filed for bankruptcy, but they’ll be able to see the improvement over time following your bankruptcy. It’s even possible to achieve a very high score following bankruptcy, which proves to creditors that you worked to improve your situation even though there was a problem in your financial past.
The more time that passes since your bankruptcy the more your credit score will improve, as long as you stay on track with your finances.
Beware Predatory Lenders Following Bankruptcy
Some people are concerned they’ll never be able to get approved for credit after they file for bankruptcy. Nothing could be further from the truth.
Many people even find they receive numerous offers after their debts are discharged. There are a few reasons for this.
First, creditors know you’ll likely feel desperate and be willing to accept terms on a credit card that would otherwise be unappealing. Second, they know that because you recently filed for bankruptcy it will be several years before you can file again. This means they aren’t at risk for the discharge of any debt you accumulate with them and they’ll be able to sue you, successfully, if you let your payments lapse.
If you’d like to know more about the rules regarding multiple bankruptcies, check out this information.
Be careful about accepting offers for credit following bankruptcy. Unscrupulous lenders will take advantage of your situation and if you don’t understand your options, you might find yourself back in financial trouble after completing your bankruptcy.
If you have questions about how bankruptcy affects your credit score or you want to know more about how filing can improve your financial situation, we can help. Contact the Law Office of Robert M. Geller at 813.254.5696 to schedule a consultation to discuss your case.
