How Your Credit Score Is Affected by a Bankruptcy Filing
If you’ve weighed all your options and found that filing for bankruptcy is the only one left open for you, you may want to know how your credit score is going to be affected by the act. While the number of bankruptcies has declined over the past decade or so, there were still around 800,000 business and personal bankruptcy filings in 2017. Call our lawyers at Neuner & Ventura LLP today if you’d like to discuss the process or get it started.
Main Problems Affecting a Credit Score After Bankruptcy
Filing for any type of bankruptcy will invariably cause your credit score to lower substantially. The exact amount will largely depend on how high your score was to begin with. A higher initial score also means that the drop will be greater. Individuals with a credit score of over 700 have seen their numbers go down by more than 200 points following a bankruptcy filing. Knowing how your credit score is going to be impacted once you file for bankruptcy may help you plan on how you’re going to eventually rebuild that credit.
Filing for a Chapter 7 or Chapter 13 bankruptcy will also adversely affect your credit report in a similar manner as it does your overall score. The actual information from your bankruptcy is kept on your credit report for quite some time. For instance, public records from a standard Chapter 7 bankruptcy will be kept on your credit report for a period of 10 years. On the other hand, the details of a Chapter 13 bankruptcy will be kept on your credit report for around seven years. Some of the additional bankruptcy details that are listed on your report for seven years include:
- Any accounts that were included in the bankruptcy
- Third-party judgments
- Collection debts
- Tax liens
Lessening the Negative Impact on Your Credit Score
The negative impact of a bankruptcy filing will automatically lessen as the years go by, causing your credit score to slowly increase. While a bankruptcy filing has a substantial influence on a credit report and the score associated with it, the debts are already discharged, which means that the weight of the bankruptcy is most keenly felt immediately after it has been filed.
As long as additional problems don’t occur, credit scores usually start to increase slightly very soon after the bankruptcy has been filed. Once the information has been fully removed from your report after 7-10 years, it will no longer cause issues with your credit score.
How Credit Is Rebuilt Following a Bankruptcy Filing
There are several steps people commonly take when rebuilding their credit score following a bankruptcy. Most individuals get a new line of credit, which is usually available via a secured credit card. A secured card works by having the individual pay a deposit that acts as the monthly credit limit until a certain amount of time has passed. Making monthly payments and keeping debt at a low level helps with the rebuilding of a credit score. It’s also possible that the credit report still contains debt that should have been discharged with the bankruptcy filing. This can be cleared up with a simple phone call.
How a New Jersey Bankruptcy Attorney Can Help
Regarding filing for bankruptcy, at Neuner & Ventura LLP, we want to make sure that all your needs are met. Whether you want to know more about how your debts will be discharged and your credit score will be affected or you still need time to ponder your various options, we are here to help. We have extensive experience with handling both types of bankruptcies, and we’ll assist you in any hearings that occur throughout the filing process.
If you’re seriously considering filing for bankruptcy in New Jersey, contact us at our Marlton office today by calling (856) 596-2828. The bankruptcy lawyers at our firm can determine which form of bankruptcy is best for your situation.