Bankruptcy and Your Credit Score

Debt is one of the few constants in life. Sometimes the mountain of debt can become so enormous that it feels as though there is no relief in sight. When this happens many individuals begin to feel as though filing bankruptcy is the only way out. Many of these people however are not fully aware of the ramifications of taking this action until after the fact at which time it is too late. While bankruptcy is one of several possible legal actions to help a person get debt under control it should only be used as a last result. The reason for this is the fact that this action can have a seriously negative effect on a person’s credit score and this one action alone can remain on your credit report for up to a decade.

When you are considering filing bankruptcy to alleviate your financial obligations it is highly recommended that you consult with financial advisors. These individuals are highly experienced in these matters and can explain in detail how it will affect not only your credit score but your overall credit standing now and in the future as well. This gives you the opportunity to fully comprehend the consequences of the actions you are about to make before you make a final decision. This action prevents many individuals from making decisions that they may later regret.

When a person files bankruptcy it can be seen by anyone because these are public records. Bankruptcy filings are also reported to each of the credit bureaus as well. Many potential lenders or creditors look upon the presence of a bankruptcy on a person’s credit report in a very negative light, even more so than delinquent or nonexistent payments. For this reason bankruptcy affects a person’s credit rating in a very negative way and does so for many years. In many cases just the presence of a bankruptcy can lower a person’s credit score by one hundred points or more.

For some people the act of filing bankruptcy may be the only option. Unfortunately this does not necessarily mean it is the most logical action to take. One reason for this is the fact that not all financial obligations can be disposed of through the filing of bankruptcy.

Some of the most common of these is:

  • School loans
  • Child support
  • Money owed to the IRS
  • Alimony

It is essential to the status of your credit that payments such as these are made on time. Late or delinquent payments such as these can still have a negative impact on your credit even after filing bankruptcy.