So, you're considering filing a Chapter 7 or a Chapter 13 bankruptcy case but worried about what it will do to your credit score. This is a legitimate concern as, by law, a chapter 7 bankruptcy filing can show up on your credit report for as long as ten years from the date of filing and a chapter 13 bankruptcy case can show up on your credit report for as long as seven years from the date of filing.
The Impact of Bad Credit Versus Filing Bankruptcy
Perhaps the better question is, how much worse can it get? If you are behind on credit card, automobile and/or house payments, your credit score is probably not so good at the moment. And, late payments, collections, and foreclosures will remain on your credit report for as long as seven years. So, filing your chapter 7 or chapter 13 bankruptcy case probably won't hurt your credit score that much. And, filing bankruptcy will give you a fresh start, allowing you to rebuild your credit in less time than it would take you paying minimum monthly credit card payments.
How Can Filing Bankruptcy Improve My Credit Score
You do have options: don't file for bankruptcy – credit score woes continue; file for bankruptcy – credit score improves as you put positive payment history between you and your bankruptcy case. Think about it this way-after you file bankruptcy you have all of your income free of the claims of your creditors. That makes you a better credit risk than you were when your debt to income ratio was so bad. You will have to work on your score but the bankruptcy filing will mean less and less as your score improves.