Bankruptcy and Consumer Credit Scores

If you have filed or are filing for bankruptcy, one natural question will be to wonder about the impact on your consumer credit score.

The answer to that question will depend on many variables. The damage to the credit score can depend on how good your credit score was before filing bankruptcy. If you had a high debt-to-asset ratio and delinquencies on several different accounts, your credit will certainly suffer. This just means the credit score dip will not be as severe. If your credit score was fairly good before filing for bankruptcy, the credit score drop will be more significant.

Of course, it's important to understand personal bankruptcy.

Let's review Chapter 7 and Chapter 13 bankruptcy:

• Chapter 7 bankruptcy: This involves dissolving all debts that legally qualify for dissolution. Many, if not all debts incurred prior to filing Chapter 7 bankruptcy are discharged. This means all personal debt liability is erased. This also means there is no longer a requirement to pay off unpaid credit accounts.
• Chapter 13 bankruptcy: This is different from Chapter 7 bankruptcy in that some or all debts must be paid off over time. This bankruptcy option is usually reserved for customers who have a steady income. This allows creditors to recover a portion of the money that is owed.

Both types of bankruptcy will show up on your credit score. A Chapter 7 bankruptcy will show up on your credit for no longer ten years from the date it was filed. Chapter 13 bankruptcy will remain on your credit score for no longer than ten years.

If you have questions about the bankruptcy process, contact attorney Chris Carrozzella today.

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