How Does Bankruptcy Affect Your Credit Score?
One of the commonly asked questions that the Alva Wesley Thomas & Associates bankruptcy lawyers answer is “How does filing bankruptcy affect my credit score?” Clients often wonder if it will drop significantly or will there just be a slight decrease. Interestingly enough, your credit score may not crash and burn like you fear. Here is what you need to know about the impact of bankruptcy on your credit score.
Your Pre-Bankruptcy Credit
If you owe a lot to a number of different creditors, it’s a safe bet that they’ve been reporting your negative activity to one or all US credit bureaus (Equifax, Experian, and TransUnion). If so, this could mean that your credit score has already dropped significantly. Furthermore, if you owe back taxes to the Federal Government or the IRS has placed a lien on your property, this could complicate the issue. Don’t be alarmed as bankruptcy lawyers can still help. They are used to dealing with creditors and financial agencies while you are not. Thus, having a good lawyer to represent your rights becomes important.
Your Post-Bankruptcy Credit
Once you’ve filed a Chapter 7 bankruptcy or Chapter 13 bankruptcy, an automatic stay goes into effect and creditors cannot make any attempts to contact you by e-mail, letter, or phone call. If you file Chapter 7, all non-exempt assets must be liquidated in order to satisfy any outstanding debts. If there is any remaining debt, it will be discharged.
With a Chapter 13 bankruptcy, you’ll have to repay your debts with an income-based 3 to 5 year repayment plan. Additionally, it will take 10 years for a Chapter 7 bankruptcy to be dismissed off your credit history whereas a Chapter 13 bankruptcy is dismissed after 7 years.
The Impact to Your Credit Score
In most cases, Alva Wesley Thomas & Associates’ clients do notice a drop in their credit scores after filing Chapter 7 bankruptcy or Chapter 13 bankruptcy. Depending on the they type of bankruptcy you filed, the type of debt you owed, and other relevant factors, the decrease in your credit score could be slight or substantial. However, as you start making new on-time payments that will be reported to the 3 different credit bureaus, your credit score should begin to increase. Conversely, clients whose scores were low to begin with may notice an increase in theirs after filing bankruptcy.
If you’re one of millions of Americans who are struggling to pay their creditors, talking to a bankruptcy attorney or foreclosure attorney may be the best solution. For a FREE Consultation, call Alva Wesley-Thomas & Associates P.C. today at 713-278-0800.