Bankruptcy and credit score

Chapter 7 bankruptcy protection can remove a lot of stress, since it’s against the law to try to collect a debt that has been discharged by a bankruptcy judge. It’s a powerful tool, but there are consequences to using it. The bankruptcy case will show up on a credit report for 10 years from the date it was filed, and can impact your ability to secure certain kinds of loans. It’s important to look at the big picture to understand if this makes sense in your individual situation.

For many people, stopping calls and instant messages from debt collectors, ending wage garnishment, and removing the weight of a mountain of debt is the best choice. While that filing shows up in a credit history for many years, the impact lessens over time, especially if the debtor is disciplined. How much a credit score drops after filing for bankruptcy varies, but the lower the score was going in, the smaller number of points it’s likely to change.

There are also lenders who specialize in borrowers emerging from bankruptcy protection. While higher interest rates and down payments should be expected, for many people bankruptcy relief is worth the effort it takes to rebuild, because now it’s possible to begin from a more solid foundation.