Credit Score Under Bankruptcy
Many people are afraid that bankruptcy will decimate their credit if a person chooses to file for bankruptcy protection. However, this is false. Many people who are seeking bankruptcy protection have a credit score around the 500’s. In order for them to get rid of their debts, they have to file a Chapter 7 or Chapter 13 bankruptcy protection. A person who’s FICO score is around the 500’s will experience a raise in their credit score when they file for bankruptcy protection. Almost every person experiences a raise in FICO score to about 100 within a year.
There are a few people who may have a FICO score about the 700’s. These people come from two classes. The first class of people suffered a serious life event such as an illness, failed business, loss of a high paying employment, or something similar to these events. These people are in a worst position that they have been due to their loss. For this class of people, what type of immediate recovery they would have before their credit score will begin to suffer.
A poor credit score is coming when bills are not paid. Due to the great length of their debts remaining present, it is nearly impossible for them to recover in paying their bills. If they file a Chapter 7 or Chapter 13 bankruptcy protection, then they credit score may likely to recover faster as opposed to let it sink lower into the abyss and allow the credit score longer to recover from such a situation.
The second class of people have above 700 FICO score who are people that overdo it and continue to use their credit cards and stay current with their credit lines. These people complain that they are living paycheck to paycheck because all their earning goes toward their creditors. Realistically, these people credit score should be around 500, but what they do that they borrow more and more money to pay their creditors. Essentially, they are digging themselves a deeper grave when it comes to debt. They continue to accumulate debt until they cannot pay it anymore. To resolve their problem, they have to stop using credit cards to buy the essentials such as gas and food and file for bankruptcy protection. These people need to go back to using cash to make purchases and leave the credit cards behind and do not look back. If they tell me that they cannot afford to pay for bankruptcy protection, I then tell them you cannot afford to pay 36% interest on purchases you make through the credit cards, which you are unable to make payments on in the future. This does not make any economic sense to these people who are stuck in this rut. They are desperate to get out, but do not have the courage to take the leap to file for bankruptcy protection, which they desperately need.
Even though filling bankruptcy protection will remain on your credit for 10 years, horrible credit remains there for 7 years. If a person pays off their debts by 6 years, the horrible credit history will not show another 7 years. This step will take longer than the actual filing for bankruptcy.
People tell me who file for bankruptcy protection show an improvement to buy vehicles being offered at a reasonable interest rate to finance the vehicles. In a period of 3 years, it is doable to buy a home, but with a lot of debt that would be impossible to do such a thing.
A bankruptcy attorney can help on how this can help your credit. You can contact the Soubra Law Firm to retain an attorney with your bankruptcy filing. You can contact the Firm at 301-219-5038. You can e-mail us using the contact form by providing your information to tell us, so we can best help you determine whether filing bankruptcy is right decision for you.