It is no suprise that Chapter 13 bankruptcy and Chapter 7 bankruptcy will negatively affect your credit. A bankruptcy filing can stay on your credit report for as long as 7-10 years under current law. Further, it will result in a drop in your credit score. However, the long term effects of bankruptcy are not as severe as many clients fear.
In most cases clients will see a dramatic improvement in their credit score in a few months after bankruptcy. This occurs because most of the credit damage for clients happens before they file bankruptcy. Whether they fall behind on their mortgage, stop paying credit cards, or have medical bills in collections, most clients have taken major hits on their credit report. Once they decide to file bankruptcy, their credit can only go up and does so rapidly. In fact, some third-party credit reports can estimate your bankruptcy score after bankruptcy. If you are concerned about the effect on your credit, consider asking your attorney to pull a credit report that contains this analysis so that you can see the net affect on your credit. While credit should not be the determining factor when considering bankruptcy, it is important to recognize that bankruptcy can adversely affect credit for some time following discharge.
This post was written by Benjamin Yrungaray
Benjamin Yrungaray handles bankruptcy and loan modification cases at First Source Law. He is a member of the state bars of California (#256224), Pennsylvania (#208558), and New Jersey. He is also admitted in the Central District Court of California, Southern District of California, and New Jersey District Court.
