Bankruptcy law offers powerful debt relief tools designed to help struggling borrowers regain control over their finances. Unfortunately, many people hesitate to take advantage of these programs, partly based on worries that filing for bankruptcy will ruin their credit forever. Here’s what you should know about how bankruptcy affects your credit score so that you can make the right choice.

A Guide to Bankruptcy & Credit Scores

Does Bankruptcy Affect Your Credit Score?

After filing, most people will see an initial drop in their credit scores. While there’s no standard point reduction for seeking bankruptcy protection, most borrowers can expect to see their rating drop by 160 to 220 points. This may seem serious, but it’s often less damaging to your credit reputation than a history of missed payments, defaulted debts, and accounts sent to collections.

How Long Bankruptcy Affects Your Credit

Chapter 13 bankruptcies stay on your credit report for seven years, after which they’ll no longer impact your credit score. However, if you used chapter 13 to make up arrears on a mortgage or car loan, those debts may stay on your credit report longer than the bankruptcy itself. Bankruptcy law allows chapter 7 liquidations to stay on your credit report for up to ten years.

Rebuilding Credit After a Bankruptcy

Fortunately, most borrowers can start reestablishing their credit soon after filing for bankruptcy. Discharging your debts can make it easier to build up a savings and stay current on any accounts you’re still responsible for, which will soon raise your score.

Lenders also know that you’re unable to file for bankruptcy again, so you may be able to qualify for a secured credit card or store charge account within a few months. Be careful to never charge more than you can pay off in a month and always make payments on time.

If you’re struggling with unmanageable debts, Gilbert P. Kaback, Attorney at Law in Colchester, CT, has the bankruptcy law experience to help you get the second chance you deserve. This accomplished legal team has been serving borrowers throughout the area for over 20 years, providing top-notch legal services at fair prices. Visit their website for more on their bankruptcy law services or call (860) 537-0874 to arrange a free initial consultation.