Chapter 7 bankruptcy offers a way for people struggling under a huge financial burden to wipe out most of their debts and get a fresh start. However, many people are wary of filing for bankruptcy due to the effect it can have on their credit.
The public record of a Chapter 7 bankruptcy can remain on a person’s credit report for up to seven to ten years, meaning future creditors will be able to see that a person filed for bankruptcy up to a decade after filing. Other references to bankruptcy, such as accounts and tax liens that were discharged in bankruptcy and debts to collection agencies, can remain on a credit report for seven years but will show a $0 balance. While this may seem daunting, there are ways to raise your credit score after bankruptcy effectively.
Rebuilding Credit After a Chapter 7 Bankruptcy
If your credit score is 650 or higher, filing bankruptcy may have a negative impact on your credit rating. But, if your score is low, with high balances, collection accounts and judgments affecting your score, filing bankruptcy and discharging these debts may actually raise your score. (Does that make sense?) People who file bankruptcy can start rebuilding their credit almost immediately after filing.
Not all filers will see the same effect on their credit after bankruptcy. Your post-bankruptcy credit score will depend on:
- The amount and number of debts. There are many different calculations at work in determining a person’s credit score. The specifics of your bankruptcy play a huge role in the impact on your credit, such as the amount of debt discharged and the number of negative and positive accounts you retain.
- Your past credit history. If you have a good history of paying your bills on time (even before your financial troubles began), that information is not lost after bankruptcy. Your payment history on the accounts included in bankruptcy are retained in your credit report, and affect the scoring formulas in the decade after your filing.
- Your actions after bankruptcy. How you rebuild after bankruptcy can affect your score enormously. Every time you make an on-time payment to current creditors, maintain a low balance on a credit card, or make regular payments on installment loans, you will boost your score month by month.
If you are considering bankruptcy, call us today or fill out your contact information to make an appointment with a Georgia bankruptcy attorney.