The Impact Bankruptcy Can Have On Your Credit
If you are unable to make the necessary payments to creditors to get out of debt, your best option will be to use bankruptcy. While it can help discharge your current debts and consolidate others, it does have a huge impact on your credit score. Here is what you can expect to happen if you file for bankruptcy.
Your Bankruptcy Stays On Your Credit Report For Several Years
Many people do not realize how long bankruptcy will remain on your credit history. While bankruptcy will eventually go away, it will impact you any time that you need to use your credit history to borrow money in the future.
Chapter 7 bankruptcy will show up on a credit report for 10 years, which is due to the form of bankruptcy allowing more debts to be discharged rather than paying them back. Meanwhile, a Chapter 13 bankruptcy will show up for only 7 years. Chapter 13 bankruptcy does require debts to be repaid as part of a payment plan, so the long-term consequences of using bankruptcy are not as long.
Your Past Creditor Debts Will Not Disappear For A While
If you owe a specific creditor money, know that their debt is not going to disappear from your credit report. It is going to stay on the report until the terms of the bankruptcy are complete. This means that if you had a debt to a credit card company, a new credit card provider that you apply to is going to see the debt that was not repaid. This can make the creditor less likely to open an account for you.
The same applies to other debts, as well. If you owe a creditor in a specific industry money, you may find it hard to borrow money in that industry as long as the bankruptcy shows up on your credit report.
Your Credit Score WIll Drop
Using bankruptcy will cause your credit score to immediately drop. This can disqualify you for many services that require your credit score to be above a certain amount. With the inability to obtain a credit card and build credit again, you may find it difficult to boost your credit score to a higher number over the years.
The impact of a bankruptcy can have a far reach on your credit report. Make sure to work with a bankruptcy lawyer so that you know the impact that bankruptcy will have on you.