There are a lot of misconceptions and misinformation out there when it comes to bankruptcy and the impact it will have on your credit score going forward. Due to some of these misconceptions, bankruptcy is often treated as a scarlet letter that it isn’t. Much of this information is being disseminated by credit card companies who have no interest in you discharging your debts, because then they don’t get paid.
Quite obviously, filing for a Chapter 7 or a Chapter 13 bankruptcy will have a negative effect on your credit score and impact your ability to get low interest rate loans and credit cards. Records of your bankruptcy may stay on your report for up to 10 years. However, if you’re already considering bankruptcy, your credit score may already be on the lower side. You can’t make a decision about your financial future based solely on your credit score; a fresh start will do wonders for your future credit rating.
No creditor wants to see a bankruptcy on your report, but the damage the filing will do to your score depends on where your credit was before you filed. For example, if your credit rating was already in the dumps before you filed, a bankruptcy is not going to impact it that much. However, if somehow you had great credit before filing (perhaps one large and unexpected medical bill sank you into serious debt), bankruptcy could likely have a larger impact on your score.
People who are living check to check with no hope of paying old debts must consider the totality of their situation. Would you rather have terrible credit and be sinking further and further into debt, or would you rather have your debts discharged leaving you with a poor credit rating yet hope for a brighter financial future?
Even if you have good credit, but unfortunate circumstances put you in a tough financial position, it may be better to be proactive rather than reactive. How much lower will your score be if you wait three years before you determine you have no chance of paying your $50,000 hospital bill? Realizing the limits of your finances and projecting forward will allow you to be proactive in this situation and file for bankruptcy to get the clock started sooner rather than later.
Every situation is different, and bankruptcy law is complex. It’s wise to consult with a highly qualified bankruptcy attorney in your area before making your decision.
Contact the Law Office of Joel R. Spivack today to discuss your finances and bankruptcy options. He has been helping New Jersey and Pennsylvania residents get back on track financially for over 30 years.