Bankruptcy Affect Credit?
Will bankruptcy affect credit scores? While it’s true that declaring insolvency will impact your credit, there are some surprising details that should be taken into consideration.
Trying to secure any type of loan after declaring bankruptcy can be almost impossible. However, the impact of this declaration upon your credit score may not be as drastic as you think. Since most people that are facing becoming bankrupt hardly have great scores to begin with, clearing the credit slate isn’t all that detrimental. All high balances and unpaid debts that were once on your record will be replaced with a statement such as “Chapter 7 Bankruptcy” or “Chapter 13 Plan.” Does bankruptcy affect credit? Sure it does, though both types of insolvency largely impact your score in the same way.
Interestingly, once you begin to rebuild your credit your score will be compared with the scores of others that have also declared bankruptcy. If you manage to acquire a few credit cards, pay them back monthly, and build your credit, your score could glow next to a person that neglects to rebuild their credit after declaring bankruptcy. While these facts ring true, you should not file simply to erase your debts and gain a better credit rating.
While financial experts recognize that some people have better scores after filing, they still recommend that you try and clear your debts without filing a Chapter 13 or Chapter 7. Why? You risk losing all of your worldly possessions if you file. You home, car, and any other asset will (most likely) be taken, sold, and used to pay your debts. That said, if you are really struggling against a mountain of bills, lots of creditors at your back, and a credit rating that is less than desirable, bankruptcy may be your best option. To answer the previous question (will bankruptcy affect credit?), the answer is a definite “yes,” though it may not negatively impact it.
No matter what you decide to do, hiring a bankruptcy lawyer to go over your options will be worth your while. You can try to figure out most of this stuff on your own, but a lawyer will be able to provide you with proper legal advice.
As you can see, it’s true that bankruptcy affect credit… though it is possible to make that score better than it ever was after filing.