As beneficial as filing for bankruptcy protection may be, there are some important drawbacks to consider, some of which may impact your finances for years to come. For instance, whether you file for chapter 7 or chapter 13 bankruptcy, you’ll likely see an immediate drop in your credit score, which could make it more difficult to secure housing or purchase a vehicle. However, many borrowers find that they can begin rebuilding their credit almost immediately, without the burden of unmanageable debt.

The Effect of Bankruptcy on Your Credit Score

As soon as your bankruptcy petition is filed, your credit score will likely decrease by up to 200 points. As a general rule, the higher your rating was before the bankruptcy filing, the more serious the impact will be. However, having several late payments and defaulted accounts may actually be more detrimental to your rating, with no opportunity to begin correcting the problem.

The debts discharged in the bankruptcy and the filing itself are listed separately on your credit report. While a chapter 7 bankruptcy filing will remain on your report for up to 10 years, the debts themselves will drop off after seen. Chapter 13 bankruptcies will also stay on your credit report for up to seven years after the conclusion of the payment plan.

Rebuilding Your Credit After Bankruptcy

Filing for bankruptcy protection gives you the opportunity to begin re-establishing your credit, a process which you can start immediately. Build up a savings account and apply for a secured credit card or store charge account. Paying off the balance each month will demonstrate that you can use credit responsibly.

Filing for a chapter 7 or chapter 13 bankruptcy can be overwhelming and confusing, which is why so many High Point, NC, residents turn to the professionals at Anderson Law Firm. This law office is committed to providing high-quality legal service to all of their clients, helping you reclaim your life from debt. Follow their Facebook for more tips and advice, and call (336) 431-7336 or visit their website to find out how they can help.