Why Your Credit Score Matters When Filing for Bankruptcy
Filing for bankruptcy can have an impact on your credit for either seven or 10 years. This depends on whether you opt for Chapter 7 or Chapter 13 protection. Therefore, it may be worthwhile to check your credit prior to filing for protection from creditors, and contact a bankruptcy attorney for advice.
Your Credit Score Could Drop by 100 Points or More
Those who have good credit could see their scores drop by 100 points in a typical bankruptcy case. However, it is possible to see a decrease of up to 200 points depending on your specific credit profile prior to filing. Therefore, filing for bankruptcy with a good credit score may not be the best solution unless you don’t have any money to pay your bills.
A Bankruptcy Could Make It Harder to Get a Loan
Even after your bankruptcy case is dismissed, a lender will be able to see that you have filed in the recent past. A lender may also find out that you have filed for bankruptcy because you generally have to disclose that fact when applying for a loan. As a result, a bankruptcy could prevent you from getting a loan or good rates on insurance or other products 10, 20 or 50 years after filing.
There Are Alternatives to Bankruptcy for Debtors With Good Credit
If you are having trouble paying your bills, there may be other ways to resolve your debt issues without filing for bankruptcy. In many cases, your credit card company will allow you to make a payment after the due date without assessing a late fee. It may also agree to reduce your interest rate for a period of several months or more. Depending on your relationship with that creditor, the fact that a payment was made late may not be reported to credit bureaus.
Debt Consolidation Options May Be Available
Assuming that you have above average or excellent credit, there may be ways to consolidate debt at a low interest rate. For instance, you could choose to transfer credit card debt to another card with a zero percent introductory rate. If you own a home, it could be possible to take out a home-equity loan or line of credit. Personal loans might also be available at rates lower than those that are currently charged on your existing debt balances.
Credit Counseling Services May Help
A credit counselor may be able to sit down with you and talk more about how to manage your debt better. This conversation may provide insight into ways that you can increase your income or cut back on expenses. Furthermore, speaking with a credit counselor generally satisfies one of the requirements that are necessary prior to being able to file for bankruptcy. So, if you feel like bankruptcy is your best option after speaking with a financial professional, it will be easier to do so in a timely manner.
What If You Have Average or Bad Credit?
If your credit score is at or below 640, filing for bankruptcy may actually be helpful. However, this depends on why your credit score is so low. In many cases, bankruptcy will help you get current on past-due debts or reduce your debt-to-income ratio. To determine the possible impact of a filing on your credit score, you may wish to consult with a legal or financial professional.
There May Be Other Benefits to Bankruptcy
Regardless of your credit score, bankruptcy may put a stop to creditor phone calls or provide additional leverage to renegotiate the terms of a secured loan. Filing may also make it easier to negotiate with unsecured creditors as settling a debt may be easier than going through a bankruptcy proceeding.
If you are looking for input from a bankruptcy attorney, give Neuner & Ventura LLP a call today to learn more about how we can help. You can call our office in Marlton, New Jersey, at (856) 596-2828 or visit us at the corner of Ardsley Drive and Route 73.