29 December ,2014 By Admin Category:Bankruptcy

Many people have concerns regarding their financial well-being and with that comes their credit score. Although declaring bankruptcy has a negative effect on your credit score, the effect is varies. It is important to note that the potential credit score drop should not be a deciding factor in whether you declare bankruptcy or not.

Drop in Score

A bankruptcy can drop your credit score as much as 220 points and remain on your credit history for up to 10 years, according to the Moneycrashers website. However, the amount your score drops depends on where your credit score was when you declared bankruptcy. If you have a high score, it will drop more than if you have a lower score. Typically, an individual has a poor credit score at the time of a bankruptcy because high debt levels, and missed payments and defaults. Accordingly, individuals contemplating a bankruptcy have lower credit scores to begin with.

Advantages of Declaring Bankruptcy

Not surprisingly, declaring bankruptcy should have a positive impact on your credit score in the long run. In other words, if you declare Chapter 7 bankruptcy, your debts will be cleared, giving you a chance to start over and start rebuilding your credit score immediately. If you declare Chapter 13 bankruptcy, your debts will be consolidated into payments that you can afford, which will help you improve your score by reducing your debt, and avoiding late or missed payments. If you don’t declare bankruptcy and continue to struggle with debt and making payments, your credit score will likely continue to drop.

Effect Over Time

Though bankruptcy will reduce your credit score, it does not take long for you to start rebuilding it. As previously mentioned, although a bankruptcy filing will remain on your credit report for up to 10 years, its effect on your score lessens over time. If you can get a credit card after bankruptcy, you should do so and use it responsibly to rebuild your credit. As soon as you are able, get any loan such as a car loan, and make on-time payments. These actions will help you quickly rebuild your score.

Help with Bankruptcy

If you are considering a Chapter 7 bankruptcy, it makes sense to sit down with a Glendale bankruptcy lawyer to look at your options. Contact The Law Office of Henrik Karapetian for a free bankruptcy consultation.