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How long will bankruptcy limit credit options after you file?

| Jul 9, 2021 | Firm News

Your credit score determines everything from what job promotions you can receive to how much interest you pay on a mortgage or credit card. The higher your credit score, the better your opportunities in life.

Bankruptcy involves declaring your inability to repay your current debts and asking the court to discharge them. A successful bankruptcy allows you to regain control over your budget. However, the bankruptcy will immediately drag down your credit score and impact your opportunities. How long will the damaging effects of bankruptcy impact you after you file?

Your score dropped immediately but then slowly starts to rebuild

Depending on your previous use of credit and other factors, your credit score could drop by more than 200 points when you file for bankruptcy. However, rather than having multiple delinquent accounts or judgments on your record, you will instead just have the one public record from the bankruptcy filing.

As you start rebuilding credit history after your discharge, your score will begin to creep up. Many people will be able to qualify for mediocre credit offers within a few months of discharge and larger forms of financing within a year or two.

Eventually, the bankruptcy will come off your credit report entirely, allowing your score to bounce back. Your discharge will roll off your credit report 10 years after a Chapter 7 discharge or seven years after a Chapter 13 discharge.

Understanding the impact of a potential bankruptcy filing on your credit score can help you better determine whether bankruptcy is the best solution for your current financial circumstances.

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