Popular Bankruptcy Misconceptions – The Credit Report

One of the most frequently asked questions of our clients and prospective clients is “What happens to my credit after I file bankruptcy?”

It is a simple question, but the answer is not as straightforward.

As I often tell my clients, there is no “broad brushstroke” answer that applies to everyone equally.  Each person brings their own financial history to the table when they file a bankruptcy case, and the case itself can impact people in different ways.  A credit report is, in essence, a way for creditors to assess the risk of lending you money.  Debt-to-income ratio, steady employment, and on-time payments are all considered in that risk assessment.

If an individual comes into our office with a low credit score and a lot of credit card debt, a Chapter 7 bankruptcy will discharge that debt and can significantly improve their debt-to-income ratio.  Our clients are often surprised to hear that improving this ratio may actually cause their credit score to increase after filing!

Your bankruptcy filing information (case number, filing date, etc.) does stay on your credit report for up to 10 years.  However, good credit may be re-established within a few short years of filing.  Many people assume bankruptcy “ruins” their credit for 10 years, but that is not always the case.  Post-bankruptcy actions have a significant affect on your ability to obtain future credit.  Showing your creditors you have the ability to pay back what is borrowed and making timely payments will go a long way toward re-establishing yourself as a good credit risk.

For more information about credit reports and how to build good credit be sure to check out the following link to information provided by the Federal Trade Commission:

https://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre03.shtm#improve

For more information about bankruptcy and whether filing a case is right for you, contact Pollak, Hicks & Alhejaj Law Offices to set up a free, no obligation consultation today.

© Wesley H. Bain, Attorney at Law

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