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Filing for bankruptcy is a big step, and there are several things to consider before you make that decision. One of the most important is how your bankruptcy will impact your credit score. Credit reports and scores have a major bearing on many aspects of our lives, from opening lines of credit and securing housing to finding a job and passing a background check. Below, the relationship between filing for bankruptcy and credit scoring is discussed in more detail.

3 Ways Filing for Bankruptcy Will Change Your Credit Score

1. Your Bankruptcy Will Stay on Your Credit Report for Up to 10 Years

There are two types of bankruptcy available to consumers: Chapters 7 and 13. Chapter 7 is a discharge of debt that eliminates many types of unsecured debt; a Chapter 7 filing will remain on your credit report for 10 years. Chapter 13 is a debt payment plan, in which you pay back what you owe over an extended period of time, typically three to five years; a Chapter 13 filing will remain on your credit report for seven years. This means that anyone accessing your credit will see your credit score and all bankruptcies you have filed within the last 7 to 10 years.

2. Your Score Might Actually Improve After Filing for Bankruptcy

filing for bankruptcyThough it runs counter to popular thought, many consumers who file for bankruptcy actually see their credit scores improve. This is because in the months or years leading up to bankruptcy, you probably weren't able to keep current on your outstanding debt, and the resulting defaults caused your credit to take a substantial hit. But after bankruptcy, you are given a fresh financial start and know how to make better financial decisions, which are reflected in a higher credit score.

3. You Can Still Get Credit Post-Bankruptcy

Don't think that just because you have a bankruptcy on your credit report or a lower credit score that you won't be able to open new lines of credit. In fact, securing new credit is an essential step in rebuilding your finances after filing for bankruptcy. You will likely have options such as low-limit credit cards or prepaid credit cards, but these can be ideal for getting back on your feet; be sure to pay close attention to interest rates and finance charges.

 

If you're considering filing for bankruptcy, let the attorneys at Greene Law, PC, help you start the process. For 25 years, they have been serving the Farmington, Connecticut region. Call (860) 676-1336, visit their website, or follow them on Facebook or Google+ to arrange a free initial consultation today.

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