As we all know, building and establishing good credit is a process that takes time and due diligence. For most of my clients, they turn to bankruptcy relief because of unexpected life circumstances. For some, the concept of filing for bankruptcy is hard to stomach, particularly when they have spent so long building a good credit rating over the years. When one’s financial situation is impacted dramatically by a major turn of events such as a business collapse, a divorce, an accident or illness, or a sudden job loss, then the good credit rating that the person has worked hard to achieve can be destroyed when their savings runs out and they can no longer keep up with their obligations.
If something has happened to you that has caused you to go into significant debt, then it may be time to examine your bankruptcy options. If you’re overly worried about what will happen to your credit if you file for bankruptcy, you don’t need to be. In the last 14 years I have handled more than 7,000 bankruptcy filings, and I can tell you that filing for bankruptcy may give you the opportunity to improve your credit score faster than if you chose not to file at all, and this is very encouraging news.
Most people that file for bankruptcy have already taken a major hit to their credit, and the damage to their credit score after filing for bankruptcy isn’t nearly as bad as they expected. In the majority of cases, it’s far easier to rebuild your credit after filing bankruptcy than it would be if you continued chipping away at your debts for years to come as interests, penalties and charge-offs piled up on your credit report.
Since most bankruptcy filers have late payments, charge-offs, collections, and judgments on their credit, some debtors actually experience a slight increase in their credit score due to the fact that filing for bankruptcy wipes their credit clean. While you can’t realistically expect a big jump, your credit score shouldn’t drop too much either.
To be fair to bankruptcy filers, their credit is compared to other filers in the same category as them, instead of being compared to people with excellent credit scores. The FICO scores for bankruptcy filers can vary significantly as some people rebuild their credit afterwards and some don’t. While you can’t expect to achieve an 850 score in the near future, with discipline and good credit management, it is possible to achieve a credit score in the 700s in as little as 2 to 3 years after a discharge.
For more information about how bankruptcy affects your credit and what you can do to reestablish good credit after bankruptcy, contact me, attorney Rick Flume today!
