Do you feel like you have lost control of your debt? If you struggle to make monthly payments and have limited income left over after paying bills, you may still hesitant to file bankruptcy because of concern over your credit score.
Although a bankruptcy will significantly lower your FICO credit rating, it also gives you a chance to rebuild your credit and create a positive financial future. In fact, late payments and collections caused by uncontrolled debt have likely already lowered your score.
How much will my score plummet?
Individuals who have a credit score of at least 700 usually see it drop by about 200 points after a successful bankruptcy filing. If you have a score of less than 680, expect it to decrease by around 150 points. It is impossible to predict the exact decline of your score, which will vary based on the particulars of your credit history.
How long will a bankruptcy stay on my credit?
A Chapter 7 bankruptcy remains on your credit report for about 10 years, with discharged debt dropping off after about seven years. Seven years is also the magic number for a Chapter 13 filing. However, because this type of bankruptcy does not result in the discharge of debt, you must complete your repayment plan before these items fall off your credit history. Most Chapter 13 plans last three to five years.
How can I rebuild my credit?
You will be able to get new credit long before the seven-year mark regardless of the type of bankruptcy you decide to file. Expedite the process by getting a secured credit card, using it for small purchases and making payments in full and on time every month. If you are wondering about getting a mortgage, expect to wait at least two to three years.
Although every situation is different, many people who have unpayable debt benefit from filing for bankruptcy despite the sizable credit impact.
