21st Jun 2017



A negative impact on credit rating is one of the primary reasons people give for deciding against filing for bankruptcy protection. But what is the true extent to which filing a bankruptcy will affect your credit score? Here I’ll examine the likely effects of filing a bankruptcy versus the increased debt that not filing bankruptcy will create. A bankruptcy will remain on your credit report for ten years. However, NOT filing bankruptcy will mean that your debts continue to grow, get more out of control, and eventually get passed onto a debt collection agency. The likely truth of the matter is that despite the impact  of bankruptcy on your credit rating, in comparison to the alternative scenario  it may actually have a positive impact on your credit score in the long term.

Of course while  lenders and creditors are not impressed by a bankruptcy on your credit report, the extent of the negative impact  will depend on your credit situation before you filed. If for example, you hold various delinquent accounts, and less assets than debts, your credit score is already bad. After you have filed bankruptcy, your credit rating will get worse, but this actually allows you to begin improving the rating after the first six months.

While it isn’t true that the short term consequence of  bankruptcy will increase your credit score, it may well be the quickest way to see it improve. Bearing in mind that you are probably behind on payments and that situation is likely continuing to get worse. Declaring bankruptcy can wipe out those debts and allow you to start afresh. l Immediately you will regain control of your finances and be able to take the required steps for the rebuilding of your credit profile. By not declaring bankruptcy, the pattern of  late payments and defaulting on accounts will probably continue and indeed, get worse. The total debt will increase, your credit score will not get better and you may well be only delaying an inevitable bankruptcy in the future. It is often most prudent to accept your situation and start working towards a solution today than to start the process six months further down the road.

If you want to discuss this topic further, please contact me at 281-847-4345 or rkemsley@kemsleylaw.com so we can discuss your individual situation and see if Chapter 7 or Chapter 13 would work for you and how we can help you set up a plan to pay the required fees.  The consultation is free.  Take the first step by calling me today.  I look forward to hearing from you soon.

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