What Does Bankruptcy Do To My Credit?

Although filing bankruptcy can be a life-saver for many folks, it does have consequences. One question many of my clients ask is, “what will it do to my credit?” This question is best answered by breaking it down into three other questions:

1. What does bankruptcy do to my credit score?

This means the score that the credit reporting agencies are giving you on a scale going up to 850. In my experience, if you are above 580, then filing bankruptcy will bring your score down to that point. I don’t know why, but I have tested it many times and 580 seems to be the number. Of course, your score could be lower already when you file. In that case, the bankruptcy filing seems to only have a minimal effect.

2. Can I still get credit?

You may be able to get some types of credit: auto loans, store credit, and high interest credit cards. The interest rates will be horrible at first and improve over time. The bankruptcy can be listed on your credit record anywhere from eight to ten years but has the worse effect the first two to four years. It will be extremely difficult to get a mortgage for at least four years, but I have seen it happen.

3. How long will it be on my record?

The credit reporting agencies can list any item up to ten years. By practice, they seem to list bankruptcy filings for eight years. So, anywhere from eight to ten years to have it totally washed off your record. But, do not think that means you are “untouchable” for ten years. I have seen many families fight a foreclosure or lose a home, file bankruptcy, and get into a new mortgage in four years.

Don’t let the issue of your credit score intimidate or confuse you.  An experienced Bankruptcy Attorney can help you form a plan that not only includes debt relief, but also includes rebuilding your credit score.