How will Chapter 7 bankruptcy affect my credit?

By Marrero, Chamizo, Marcer Law, LP,

One of the top concerns for people considering filing for bankruptcy is the resulting effects on their credit score. A credit score can have a lot of power, dictating where you can live and what you can buy. It is important to know where you will stand after filing for bankruptcy.

If your score is already low then bankruptcy might be a good option

Most people who consider bankruptcy will not experience a huge change to their credit score. If you are considering filing for bankruptcy then you likely are dealing with numerous delinquent accounts. If you have one or more accounts which have not been paid on time then you likely already have a median to low credit score. If this is the case then your score will not drop very much.

If you have somehow managed to keep a good credit score even when considering bankruptcy then you might see a significant drop at first. Overall a credit score can drop anywhere from 160 to 220 points. While you might cringe and think that you don’t want to further damage your credit, it is important to consider the long run effects.

Choosing to live with debt might be more damaging

Many people who are delinquent on their accounts will damage their credit for years to come while they struggle to stay on top of debts. When you file for Chapter 7 bankruptcy it will stay on your credit report for up to ten years. You will expect to see your credit score drop initially when you file. Once those debts are discharged within the first few months you can expect to see your credit slowly raise. The sooner you attack your delinquent debts, the quicker you can get your credit score on its feet.