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Although bankruptcy offers an effective solution for achieving debt relief, you may be hesitant to file over concern for the credit score. While it’s true your credit is likely to suffer some damage after declaring bankruptcy, the benefit of acquiring a fresh financial start often outweighs the negative impact. Before making such a major decision, it’s important to gain clarity on exactly what you can expect to happen to your credit after filing.

Understanding the Effect Bankruptcy Will Have on Your Credit Score

1. Your Score Will Drop 

There is no doubt filing bankruptcy will lower your credit score, but how much will depend on what the number was to begin with. The higher a score is, the further it has to fall, whereas, lower ratings may only see a slight drop. Missed payments and a lot of debt will also decrease your score significantly, so declaring bankruptcy may not end up hurting the rating that much after all.   

2. There Will Be a Long-Term Impact 

bankruptcyChapter 7 and Chapter 13 are the most common types of bankruptcies filed by individuals. Regardless of which one you choose, it will be detailed as a public record on your credit report for several years. The difference is a Chapter 7 bankruptcy generally shows up for 10 years, while a Chapter 13 is usually displayed for seven years. The good news is, over time, the discharged debts associated with your bankruptcy will begin dropping off, no longer affecting your credit score. 

3. The Damage Isn’t Permanent  

Contrary to popular belief, whatever damage is done to your credit score won’t be permanent. It is possible to start reviving your credit shortly after the debts have been discharged and your finances are back on track. For people who are severely in debt, filing bankruptcy may even help bring up their score. Despite a flawed credit report, rebuilding a healthy credit profile is possible as long as new lines of credit are used responsibly.  

 

The bottom line is that filing bankruptcy can be detrimental to a credit score initially. However, once you begin making good financial decisions and reestablishing your credit, the situation will only continue to improve. The best way to determine if bankruptcy is right for you is to consult a knowledgeable attorney. With more than 65 years of combined experience practicing law, Cecil & Cecil PA has been entrusted to help numerous High Point, NC, residents eliminate their debt problems. Contact them at (336) 883-8383 or visit their website for more information. 

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