Credit Scores After Bankruptcy

There is a misconception that filing for bankruptcy damages your credit and prevents you from securing credit in the future. In fact, this is one of the most common excuses people have for not seeking debt relief help through bankruptcy. This misconception can do more harm than filing for bankruptcy in many cases, as it prevents people from making an educated decision to seek financial relief.

Credit Myth Busted

While there is truth to a bankruptcy mark being noted on your credit profile for up to ten years, the mark of having filed for bankruptcy doesn’t actually impact your score in ways that you would assume. Most people think their score will drop after a bankruptcy filing when, often, the opposite is true.

Bad credit scores are created through delinquent debts, missed debt payments, high debt balances, and a ratio of debt-to-limit that exceeds 30%. In other words, debt balances that are nearly at the maximum limit allowable can bring down your credit score quickly. When you file for bankruptcy, you are either provided a plan to repay a portion of your debts through Chapter 13 or your qualified debts are eliminated through a Chapter 7 discharge. When these debts are paid down until resolved or eliminated in Chapter 7, your debt balances are lowered and the debt-to-limit ratio is brought down. The results of a debt discharge can actually improve your credit score following bankruptcy if you have started the process with a relatively low score.

Each bankruptcy case is unique to the individual filing for debt relief, as it is based on their combination of debts and assets. It is recommended to always work closely with a Roseville bankruptcy attorney when seeking debt relief consultation and assistance. An experienced attorney can best guide you to debt relief while working to protect your assets and income accounts.