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How will bankruptcy affect your credit score?

If you are one of the many people in Tennessee who are struggling to keep up with overwhelming debt payments, you likely have begun thinking about filing bankruptcy so as to get most of your debts discharged and consequently give yourself a fresh financial start. While bankruptcy can certainly accomplish these goals, you likely also worry about how it will impact your credit score and credit report.

No doubt exists but that your credit report and your credit score relate to each other. But while your credit report will reflect your Chapter 7 bankruptcy for 10 years or your Chapter 13 bankruptcy for at least seven years, you can raise your credit score considerably sooner than that. Credit.com reports that unfortunately, going through bankruptcy can drop your credit score by as much as 200 points. It will almost certainly lower your credit score by 130-150 points. For most people, this means that if their credit score was 680 before bankruptcy, it will take nearly five years before they can achieve that credit score again.

Rebuilding post-bankruptcy credit

It goes without saying that in today’s economy, almost no one can exist without credit of some kind. But you also know from sad experience how quickly your credit card balances can skyrocket and how difficult it can become to make even the minimum monthly payments.

While you naturally want to reestablish your credit and get a credit card as soon as possible after bankruptcy, your primary goal should be to apply the lessons you learned during credit counseling to your new post-bankruptcy life. This entails making sure you do not make the same mistakes you made before. Therefore, if you never budgeted before, you should begin doing so now.

Start by making a list of all your monthly bills and how much you must pay on each of them. If the amounts fluctuate from month to month, figure out each bill’s monthly average or, better yet, use the amount of the highest bill. And do not forget to figure in the monthly amount of any bills you pay bimonthly, semiannually or annually. Once you know how much monthly income and outflow you can expect, then you can set about determining ways to cut your expenses, increase your income, or both.

This is general educational information and not intended to provide legal advice.

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*We are a debt relief agency.
We help people file for bankruptcy relief under the Bankruptcy Code.