Bankruptcy and Your Credit Score

Everyone has bills to pay this is just a fact of life. It’s how we pay our bills that determines how likely we are to have a good credit rating. Sometimes our financial obligations become so great that it seems like the weight of the world is on our shoulders and we will never be able to climb out from under this debt. When this happens and there seems to be a limited supply of options many people begin to consider the possibility of filing bankruptcy to lighten this load. The problem is that many of these people do not fully understand the ramifications that this action truly has on their credit score. Not to mention the fact that some items cannot be cleared even with bankruptcy. Before you seriously consider this action you should take the time to research this option and get all the facts before you actually carry on with this idea. The truth of the matter is that filing bankruptcy will follow you for many years and can have a very negative impact on your credit rating.

Before anyone makes the final decision to go through with filing bankruptcy they are strongly encouraged to speak to financial advisors or lawyers who are experienced in the effects of this action. These professionals can explain all the ways that bankruptcy will affect your finances as well as your credit rating. Doing this allows you to have all the information necessary to make an informed decision and know exactly what you are getting into before doing something you might regret later on.

When you file bankruptcy these records are public. This means that they can be seen by anyone at any time. Bankruptcies are also reported to the credit bureaus and can remain on your credit report for up to a decade after filing. Many creditors look on bankruptcies in a very negative way, even more so than unpaid or delinquent accounts. This is one of the biggest reasons that bankruptcy has such a negative effect on a person’s credit score. Just the act of filing bankruptcy can lower a person’s overall credit score by 100 points or more.

For some individuals bankruptcy may be the only option however this does not necessarily mean that it is the most logical choice. This is especially true if you consider the fact that some financial obligations cannot be cleared even through bankruptcy.

These items include:

  • Child support
  • School loans
  • Alimony
  • Tax related monies owed to the IRS

When it comes to obligations of these types it is essential that payments be made on time. Even when bankruptcy is filed delinquent payments on accounts such as these is still reported to credit agencies and can still seriously damage your credit rating.