Impact on Your Credit Score

Choosing whether to file bankruptcy is a very difficult decision, even when it is strongly recommended by your lawyer that you file in order to get out of debt and begin anew with a clean slate and a fresh start on your credit.  Even when you know that bankruptcy is financially the best decision for you and your family and you are eligible to file for Chapter 7 or Chapter 13 protection, you may still be reluctant to seek this type of debt relief because of the potentially negative impact you perceive it will have on your credit report.  Before jumping to the often erroneous conclusion that bankruptcy is bound to have a negative impact on your credit score, you should first obtain your three credit reports and FICO score to determine what accounts are being reported to the three major credit reporting agencies and what your current score is.
If you have multiple accounts that have become delinquent, some creditors may have already reported negative information about these accounts to the three major credit reporting agencies, and this information may remain on your credit report for the next 7 years, causing your report and score to suffer.  In addition, each month that you don’t make payments, you will get additional delinquent reports, further damaging your credit.  If this describes your situation, your score may very well be in the 450-550 range and will stay that way for as long as delinquencies can be and are reported (7 years).  As any San Diego debt relief lawyer will tell you, many people who file bankruptcy enjoy a credit score in the low 600s within about 1-2 years after their case is filed.


\When your credit score has already suffered as a result of major delinquencies, filing for bankruptcy may not worsen your FICO score.  To the contrary, it may raise your score.  If you decide to file for Chapter 7 or Chapter 13 relief after consulting with a bankruptcy lawyer San Diego, you should remain vigilant about periodically reviewing your credit reports after your debts are discharged. This is necessary to confirm that each debt discharged in the bankruptcy is reporting to the credit bureaus accurately (that it has been included and discharged) in order to ensure that future creditors know that you no longer owe the outstanding balances listed on your pre-bankruptcy credit accounts.


That said, a bankruptcy may generally appear on an individual’s credit report for 7 to 10 years. Although some future creditors may be reluctant to work with individuals who previously filed for bankruptcy, some creditors may be flexible and would consider offering credit because these creditors know that, since the prior debts have been discharged, the individual may now be in a better financial position.  Ultimately, if you are suffering insurmountable financial obstacles, you may be in a better position in the long run financially if you choose to file for relief now.  Bankruptcy does help you get out of debt San Diego, and provides a fresh start.   For those who qualify, it may provide other protections and benefits as well.  You can stop foreclosure of your home and in many cases you can eliminate a 2nd mortgage or home equity loan against your home.  Bankruptcy truly gives you the freedom to begin anew and ultimately build a stronger and more sustainable financial future.