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5 Ways Bankruptcy Affects You and Your Credit

5 Ways Bankruptcy Affects You and Your Credit

While no one wants to consider filing for bankruptcy, sometimes unfortunate circumstances cause even the most reliable debtors to fail at meeting their financial obligations. Before filing for bankruptcy, it is essential to know about the different ways the process may impact your credit score.

#1 – It dramatically decreases your credit score

If you have good credit before filing, for instance, a score of 700 or higher, expect the score to decrease at least 200 points. If your credit score is in the 600’s or lower prior to filing, expect less impact but, nonetheless, a significant drop of up to 150 points.

#2 – It remains on your credit report for a decade

Depending on the type of bankruptcy, the time limits vary. For individuals or small businesses who are contemplating on whether to file there are different types to consider:

#3 – Filings are Public

These filings are not private. The information is easily available online and printed in local newspapers.

#4 – You may rebuild your credit later

As time passes, the effects to your credit score will diminish. Since creditors still see lending to you as high-risk, secured loans and credit cards, as well cosigners, may help reconstruct your score.

#5 – Paperwork is required

The filing is not simple. It is time-consuming, requires full disclosure, and includes many intricate forms.

Bringing It All Together

Filing for bankruptcy is a critical decision that may affect your ability to borrow from creditors for quite some time. If you or someone you know are in a similar position, think about scheduling an appointment with a local bankruptcy attorney to discuss the alternatives, benefits, and risks available for your situation.

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