How Will a Bankruptcy Affect My Credit?

By Octavio Velarde on August 24, 2020

This is usually the first question on people’s mind when they start to consider a bankruptcy, and it is a reasonable concern.

Credit is an important part of your financial life. Your credit score can determine what kind of car you can afford, where you will live, or whether you qualify for credit at all. It is understandable why protecting your credit is an important consideration when you are looking for a fresh start.

A bankruptcy will affect your credit score, but fortunately, its consequences are not as dire as many people fear. A bankruptcy will appear on your credit report for at least seven years. That means that anyone who pulls your credit will be able to see that you have filed a bankruptcy. Whether any lender decides to offer credit is dependent on their individual evaluation. It can be difficult to predict how a creditor will consider a bankruptcy.

  • For example, some landlords will not accept a tenant who has filed for a bankruptcy in the last year, or in the last 5 years, or sometimes if someone has ever filed a bankruptcy. On the other hand, some landlords are happy to rent to tenants who have gone through a bankruptcy, and with good reason: a tenant who has discharged their debts has more money to pay their rent! If you are considering filing for a bankruptcy, and have plans to move, you may want to apply for your apartment before filing to avoid that uncertainty, but that doesn’t mean you will never be able to rent an apartment again.
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Immediately after filing for bankruptcy, you can expect your credit score to fluctuate for at least the next year. However, there is no rule against using credit throughout the bankruptcy process. There is no freeze on your credit. Indeed, many people find that after filing they receive numerous offers for credit cards or car loans. Creditors are sometimes eager to lend money to someone who has gone into bankruptcy but oftentimes will offer expensive debt (with high interest rates) so it is important to carefully evaluate the terms of any offer.

Remember, however, that the purpose of the bankruptcy is to get a fresh start and have a stable financial plan. Even if credit is available, you may not be eager to accumulate more credit once you remember what it is like to live debt free.

Remember, however, that the purpose of the bankruptcy is to get a fresh start and have a stable financial plan. Even if credit is available, you may not be eager to accumulate more credit once you remember what it is like to live debt free.

The ideal outcome for a bankruptcy is when someone is able to take the money they used to pay towards interest payments, and instead put that into savings. Credit can be expensive when you factor in interest payments. When you have savings, you can lend yourself money for free and you may not need to turn to credit at all.

Ultimately, many people who file for bankruptcy will see their credit score stabilize and improve after a bankruptcy. To discuss how a bankruptcy might affect your credit score, please call for a free consultation at (619) 330-6870.

The information in this blog post is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.

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