Filing for bankruptcy can seem like an intimidating proposition for borrowers struggling to pay off their debts. However, that does not need to be; bankruptcy can provide a myriad of benefits for those dealing with financial struggles, especially for those incapable of covering any debts they may owe. Most debts can be discharged via bankruptcy, with a few exceptions like certain types of taxes, and child support payments just to name a few.
Despite the positive results that declaring bankruptcy can offer, that does not mean it lacks any downsides. Bankruptcy will likely lower your credit score, and it may appear on your credit history for several years. This could make it difficult to take out other loans or even pay off any other debts that were not discharged, but it is very important to keep in mind that these effects are not permanent, and can be mitigated with responsible financial behavior. If you are struggling with debts and are thinking about filing for bankruptcy, please contact a Bergen County bankruptcy lawyer at the Law Office of Boyd & Squitieri to schedule a free consultation.
How does bankruptcy impact my credit score?
Generally, when it comes to the impact of bankruptcy on your credit score, the process operates on a sliding scale system. A higher score will usually mean more points being taken off your credit rating. For those with a good credit score ranging from 670 to 850, the average drop is typically 200 points. Any credit score that falls beneath that range is usually treated less severely, with the average drop being anywhere between 130 to 150 points. However, while filing for bankruptcy will likely result in a poor credit score for a while, it is not common for scores to drop below 500. Even if you already had a poor credit rating prior to declaring bankruptcy, the number of points knocked off your rating will likely be much less compared to those with higher scores.
While having bankruptcy show up on your credit report can certainly have an impact when it comes to your financial maneuverability, it is not the end of the world. The time limit for it to remain on your report can depend on the type of bankruptcy you declare. For example, a Chapter 7 bankruptcy will be removed from your credit report after seven years, while a Chapter 13 bankruptcy will remain for 10 years. Although, that does not mean that you must wait that long to begin repairing your credit score. After 30 days have passed from your final discharge, you will be able to take out both short and long-term loans. This may come in the form of requesting a secured credit card for smaller necessities, or working towards a larger loan for something like a car. Exercising financial responsibility with loans will be key to bringing your credit rating back up to a strong status.
