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How does bankruptcy impact my credit?

On Behalf of | Sep 1, 2020 | Consumer bankruptcy |

One of the things that keep people from filing for bankruptcy is the fear of long-term consequences. What good is discharging or managing debt if your credit is too bad to let you do anything with your new financial freedom? Do the benefits of bankruptcy outweigh the consequences?

Despite any consequences of bankruptcy, more than 750,000 people filed for bankruptcy last year. If so many people could file bankruptcy despite the consequences, what happens to your credit after going bankrupt?

What happens to my credit?

There are false myths about how credit relates to bankruptcy. Some stories tell of how an applicant ruins their bankruptcy for life and will never fully recover a respectable position. Thankfully, this idea is entirely false.

The truth is that your credit score does take a hit after you go bankrupt, but it is not permanent. Bankruptcy may result in an applicant’s score falling into the low 500s, but there is a silver lining to it. The first thing to know is that you have the same ability to gain credit following your bankruptcy.

While you may not be able to take a home loan the same week you go bankrupt, you may be able to earn other ways of building credit. Because your debt-to-income ratio is so low, many credit card companies offer newly-bankrupt people new credit cards. Using credit cards can increase your score, with some people fully recovering in only a few months.

Do not assume the worst

Nearly a million people recognized that bankruptcy is a positive choice for them, not a negative one. You can also be someone who benefits from such an important decision. Talk with a bankruptcy attorney today to see how bankruptcy can help you.