One area of concern for people considering bankruptcy is the issue of how the filing will impact their credit score. Having a strong credit rating and history are important in today's world, affecting a person's ability to buy a home, open new lines of credit, and, in certain career fields, even find a job. Below are some important things to know about the relationship between a bankruptcy filing and your credit score.

Credit Scores Initially Drop

In the immediate aftermath of filing bankruptcy, a credit score will typically drop significantly. A person who goes into bankruptcy with a relatively high credit rating can expect to see the most substantial plunge, usually around 200 points or more. A filer with an average or lower score will still see a sharp decrease, though not as pronounced—perhaps anywhere from 130 to 150 points.

Bankruptcy Stays on a Credit Report for Years

A Chapter 7 bankruptcy, in which one's unsecured debts are eliminated by the courts, will remain on the filer's credit report for 10 years. A Chapter 13 bankruptcy, in which one's debts are restructured into a long-term repayment plan, will stay on a credit report for seven years. Any debts from third-party collectors, legal judgements, and tax liens that were eliminated in bankruptcy will also stay on one's credit history for seven years.

The Effects of Bankruptcy Decrease as Time Passes

Obviously, your credit takes a very real hit when filing bankruptcy. But if filing is your only viable path to financial solvency, don't let that initial hit prevent you from obtaining debt relief and a second chance. Over time, the impact of bankruptcy on your credit will gradually decrease. You can also take steps immediately after filing to start rebuilding and repairing damaged credit. Opening a secured credit card, pursuing the possibility of a car loan, and staying on top of all current bills can strengthen a credit score and start diminishing the effects of a bankruptcy that much faster.

By understanding how bankruptcy will influence your credit, you can begin taking the necessary steps to financial freedom. Attorney Allyson Pearce of Pearce Law Firm has more than 15 years' experience serving clients in Baldwin County, Alabama; she offers representation in bankruptcy, criminal defense, and DUI cases. Schedule a free phone consultation by calling (251) 301-8250 or visiting her online.