Filing for bankruptcy is a big decision. If you have a lot of debt and cannot manage it, it may be a smart solution to help you achieve secure financial footing again.
However, it’s important to know as much as possible about it before filing. This includes how it will impact your credit score.
Bankruptcy and your credit score
Filing for bankruptcy will reduce your credit score. It will also stay on your credit report for several years, depending on what kind you file.
For a Chapter 7 bankruptcy, it will remain on your credit report for 10 years, and for Chapter 13 bankruptcy, seven years. The amount that bankruptcy will impact your credit rating depends on your financial situation before you file.
Rebuilding your credit after filing for bankruptcy
It’s possible to begin rebuilding your credit immediately after filing for bankruptcy. The best way to do this includes:
- Remaining current on your bills
- Getting approved for a new secured or unsecured credit card
- Not borrowing more than you can repay
If you cannot take advantage of bankruptcy and stay out of debt, it may be better to consider other debt management solutions.
Making big purchases after bankruptcy
Right after your bankruptcy case is finalized, it will be challenging to get a loan or mortgage to purchase a car, house or something else. However, if you work to rebuild your credit, you should have no problem getting the financing needed down the road. While it can take years to restore your credit score, once you have, you don’t have to worry about the debt you once had.
Understanding the impact of bankruptcy on your credit
While bankruptcy can cause your credit to take a hit, you can start rebuilding it almost immediately. Knowing your legal options will help determine if bankruptcy is the right solution for your debt.
