How Long Will Bankruptcy Hurt Your Credit Score?
One of the top reasons that people avoid filing for bankruptcy comes down to fear for their future. Hurting your credit rating is often one of the main concerns that people have when they are considering bankruptcy. As many attorneys often undermine their clients, the idea of a bad credit score and bankruptcy can often be a misplaced fear. If you are in a difficult situation with your debts, bankruptcy could actually save your credit rating over time. Its important to know really how long will bankruptcy hurt your credit score.
If you missed multiple payments and you have accounts that are in collections, your credit score can sink quickly. If you are continually facing ongoing calls and harassments from creditors, your credit will continuously take hits as well. Finding a way to discharge these debts as well as avoid this harassment can be better for your sanity.
Bankruptcy may initially hurt your credit score but the negative effect that you could face over time from missed payments can be much more difficult to recover from. Your credit score may even rise if you are able to discharge a large amount of debt after the bankruptcy. This could mean that if you are facing a nearly insurmountable amount of debt, choosing to file for bankruptcy could work to boost your credit score immediately.
Because of the negative connotations of bankruptcy and credit score, most people are quick to avoid the option because they want to protect their credit score for as long as possible. If you do choose to file for bankruptcy, understanding some of the various concerns and how long it will impact your credit can be important.
A Bankruptcy Will Stay On Your File For Seven or 10 Years
Depending on which type of bankruptcy you file for, it is likely that the bankruptcy will stay on your credit file for at least 7 to 10 years. Chapter 7 bankruptcy is one of the fastest ways that you can clear bankruptcy from your record. With chapter 7 bankruptcy you can wipe out your unsecured debts in just a few months. Due to this speedy process, you can clear the bankruptcy off your credit file in a timely manner as well. With chapter 13, you will be responsible for taking on a payment plan with your creditors which is agreed upon.
The Chapter 13 repayment process ensures that a bankruptcy will stay on your record for a longer amount of time. With chapter 13 bankruptcy you will be stuck in a repayment plan for 3 to 5 years, your debt will be discharged and then the bankruptcy will be discharged from your account around 7 years from your repayment plan. A chapter 7 bankruptcy is much faster for wiping your debt away but a chapter 13 bankruptcy is often less detrimental to your credit over time. If you are having difficulty qualifying for credit after the deadline it may be wise for you to speak to a credit reporting agency so that you can resolve some of the debts or errors in reporting.
The Impact Of Your Bankruptcy Will Reduce Over Time
Financial information regarding your credit score will update over time and the newer financial information is often more significant than the older information that is included in your credit score. If your bankruptcy has only occurred in the last year or two, this can create a strong reason for many creditors to ignore your credit requests. The impact on your credit score will often be greater in the first 2 to 3 years after your bankruptcy. When your bankruptcy is five years or older it will have much less of an impact. Using your credit score responsibly and making sure that you can build positive credit after your bankruptcy is important.
You Can Recover After a Bankruptcy By
Get a credit card as soon as you can after you have qualified for bankruptcy. Getting a credit card and showing that you can use it responsibly can help you to qualify for future credit products. Choosing to regularly make small purchases on your credit card of essentials and then paying it off will show that you are being responsible with the card. Introducing it for payments on things like groceries can be a wonderful way to slowly build your credit.
Make sure you’re always paying your bills on time and pay at least the minimum on every credit account. Any card that you pay for should never go back into default again as a creditor may be quick to start pulling from your account to pay debts and more.
Try to stick to just one credit card offer. When you start to open up multiple accounts or you get a series of offers in the mail, it can be hard for you to avoid the temptation to overspend or to get confused with spreading out your debt across several cards.
If you need assistance with discharging your debt and bankruptcy be sure to contact our staff of bankruptcy attorneys today to learn more!