There may come a point when you’re worried less about your credit rating than you are the overall health of your finances. If this happens, it could lead you to learn more about the bankruptcy process.
As you consider bankruptcy, don’t lose sight of the impact it will have on your credit history and score. Even if it’s not the most important thing to you right now, it can affect your finances and personal life for years to come.
The first thing you need to understand is that a bankruptcy filing will remain on your credit report for an extended period of time:
- Chapter 7 bankruptcy stays on your credit report for 10 years
- Chapter 13 bankruptcy stays on your credit report for seven years
Either way, that’s a long time, so you need to take this into consideration before you file.
Here are some other things to keep in mind:
- Your credit score may drop: This depends largely on your score at the time of filing for bankruptcy. For instance, if you have a 700 credit score, there’s a lot of room for it to fall. Conversely, if your score is already bad, there’s not much else that can go wrong.
- The negative impact slows over time: At first, bankruptcy has the potential to hit your credit rating hard. However, as the years go by, you’ll find that things are improving if you take the right steps. In fact, you can slowly begin to rebuild your score.
If you’re ready to file for bankruptcy, you should also be ready to do the following:
- Check your credit report to ensure that the bankruptcy was reported correctly
- Seek ways to obtain new credit, such as a secured credit card, as to slowly increase your score
- Remain patient in regard to making large purchases, such as a home or motor vehicle
There are both pros and cons of filing for bankruptcy, but most people find that the benefits outweigh the risks.
As long as you know how bankruptcy will impact your credit rating, you can plan for everything to ensure that you position yourself for future financial success.