Filing for bankruptcy will not improve your credit score. At least not in the short run. In fact, filing for bankruptcy will have the opposite effect on your credit. But over time you can increase your score well beyond what you could if stay saddled with debt.
How does bankruptcy’s effect on your credit?
There’s no sugarcoating it: filing for bankruptcy will likely cause your credit score to decrease significantly — at least in the short term. You could see your score decline by 120 to 200 points, negatively affecting your ability to get loans and/or advantageous interest rates.
It’s also worth noting that a Chapter 7 bankruptcy will remain on your credit report for 10 years, while a Chapter 13 will remain for seven years. However, the impact of bankruptcy fades away with time, and it’s certainly possible for you to regain financial stability and gradually raise your credit score once again.
Short and long term effect of bankruptcy credit
Bankruptcy will have an inescapably devastating initial effect on your credit score. It is difficult to predict exactly how much of a hit you can expect to take, as credit scoring agencies do not publicly release their formulas.
You stand to suffer the most if you have a good credit score and file for bankruptcy. If you already have a bad credit score, there’s not much you have to lose from a credit perspective in filing for bankruptcy.
Still, there are some potential positive effects. In the short term, you can clear some of your delinquent account reports off your credit record, meaning they will no longer count against your score. You can also improve your debt-to-credit ratio because you will instantly discharge some of your debts.
In the longer term, you have the opportunity to start from scratch in filing for bankruptcy. You can set up a sound budget and stay disciplined to lay the foundation for good credit over time. It will take several years, but you can gradually increase your credit score in a way that would have been impossible while saddled with the debts you discharged in bankruptcy.
For more information on what you can expect to happen to your credit score when you file for bankruptcy in Georgia, speak with a trusted bankruptcy attorney at Jeff Field & Associates. Give us a call at 404-381-1278 or contact us online to set up a free initial consultation.
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