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Will Bankruptcy Affect Your Credit Score?

Filing bankruptcy helps provide you with the opportunity to get a fresh start. Like just about everything else you do relating to money, it does affect your credit score.

How Does Bankruptcy Work?

To declare bankruptcy, you must file in bankruptcy court in a proceeding that involves you and your creditors. You can file under:

  • Chapter 7, which discharges certain unsecured debt but does not allow catch-up payments and is available to businesses and individuals; or

  • Chapter 13, which is only available to individuals and sole proprietorships.

What Happens to Your Credit Rating When You File

Filing a Chapter 7 bankruptcy discharges your obligation to pay certain debts. A Chapter 7 filing remains on your credit reports for ten years from the filing. Chapter 13 does the same for seven years.

What Lenders See

Once your bankruptcy is completed, potential lenders or other creditors will see the bankruptcy on your credit report and will also see the debts that were discharged. This information will likely initially limit your ability when applying for credit. However, filing for bankruptcy will stop most creditors from continuing to report negatively each month. This will help provide you with an opportunity to work and rebuild your credit.

How to Rebuild Your Credit Score

There are many ways that individuals can work to rebuild their credit score. Some tactics to consider are:

  • Secured credit card – A secured credit card requires you to put down a security deposit as collateral for your credit line. Once set up, your use of the card, timely payments, and keeping a low balance compared to your credit limit will establish some positive information for your credit file. Moreover, if you pay the balance due in full every month, you won’t pay any interest charges.

  • Monitor your credit – Keep track of what’s going on with your credit score and credit report. Not only does this help you stay on track, but it also gives you useful information for where improvements can be made.

  • Pay on time – One of the most significant impacts on your credit score is timely payments. It is the single most influential element in your score, so it should be your highest rebuilding priority.

  • Vehicle Payments and House Payments – These secured payments can help improve your credit score after a bankruptcy (if they are reaffirmed).

Consult With a St. Louis Bankruptcy Attorney Today

If you’re confused about what you need to do about your credit situation, don’t wait till your bank foreclosures or you experience other irrevocable consequences. Contact a skilled and knowledgeable Missouri bankruptcy attorney today. Let us help you plan your financial future.