Your Credit Score and Bankruptcy

It is not easy to decide to file for bankruptcy protection. What if you need a loan in the near future? Will your credit rating be so damaged that you won’t qualify for a loan at a reasonable rate? The good news is that, most of the time, bankruptcy does not do as much damage to your credit score as you might expect. Long-term, it’s usually possible to get your credit score high enough for you to get a loan that isn’t a rip-off.

“If you sleep on the floor, you can’t fall out of bed.” If you are considering bankruptcy, your credit score is probably already low. Most likely, you have high balances, late payments, and other repayment problems. Therefore, your score might not go down much…

It is not easy to decide to file for bankruptcy protection. What if you need a loan in the near future? Will your credit rating be so damaged that you won’t qualify for a loan at a reasonable rate?

The good news is that, most of the time, bankruptcy does not do as much damage to your credit score as you might expect. Long-term, it’s usually possible to get your credit score high enough for you to get a loan that isn’t a rip-off.

“If you sleep on the floor, you can’t fall out of bed.” If you are considering bankruptcy, your credit score is probably already low. Most likely, you have high balances, late payments, and other repayment problems. Therefore, your score might not go down much if you decide to file for bankruptcy protection.

Ironically, bankruptcy even gives some credit scores a small boost. When bankruptcy is declared, high balances, records of unpaid debts and late payments are usually removed. Accounts included in the bankruptcy will be marked as such.

When your credit score is calculated, you are compared to a group of consumers in a similar financial position. If you file bankruptcy, you will be compared with other people who filed for bankruptcy. Your financial behavior only has to be better than the average bankruptcy filer’s to rise toward the top scores in your group! You won’t get a perfect credit score while the bankruptcy is in place, but a score over 700 is in the realm of possibility.

Realistically, your credit score should be one of many things you weigh in deciding whether bankruptcy would be helpful — or even possible. The rules about who can file for bankruptcy have tightened up, making it harder than ever to qualify for filing. If you can organize your financial world without bankruptcy, do it! If you are not sure, consult a bankruptcy attorney.

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