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Will Filing for Bankruptcy Ruin My Credit?

Posted By Wadhwani & Shanfeld | 9-Feb-2017

Many people who are considering filing for bankruptcy worry about how bankruptcy will affect their credit. Among the top concerns are whether it cause permanent damage or whether a person will ever be able to borrow money or have a credit card ever again. Fortunately, there is no reason to worry. While bankruptcy may affect your credit in the short run, it is a long-term debt solution that can help you regain your financial freedom, establish healthy financial practices, and rebuild your credit instead of continuing to flounder in debt.

First off, it is important to understand the difference between “credit” and your “credit report.” Credit is your ability to borrow money, while your credit report is a summary of your credit and payment history. Filing for bankruptcy, either under Chapter 7 or Chapter 13, will have an effect on your credit score and will remain on your credit report for up to 10 years. The overall effect on your credit score will depend on what your score was before filing. If it was already low, the dip in score will be much more modest than if you had good credit.

While it is true that your credit will take a temporary hit, the good news is that the effects are not permanent. Because bankruptcy gives you a fresh financial start, you have an opportunity to rebuild your credit by making timely payments and gradually reducing your debt-to-income ratio. By keeping your debt load low, getting a credit card and using it responsibly, and paying off credit card balances monthly, your credit score will gradually start to rebuild.

If you have further questions about filing for bankruptcy, we encourage you to get in touch with a Sherman Oaks bankruptcy attorney at Wadhwani & Shanfeld. Over-the-phone consultations are free of charge.

Categories: Bankruptcy, Credit

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