Credit Reports: What type of effect will filing bankruptcy have on my credit score?

© 2014

Written by Scottsdale Bankruptcy Attorney Whitney G. Coats

Your credit score will be affected negatively when filing bankruptcy, however, there’s no exact point deduction that your credit score will take.  If you have a higher credit score when you file bankruptcy, unfortunately your credit score may take a bigger hit than a credit score that is already low at the time of filing bankruptcy. A bankruptcy filer’s credit score typically can decrease anywhere from 160 to 260 points. A person with a credit score in the 600s to 700s will typically lose a higher amount of points than a person with an already low credit score in the 400s to 500s, because the lower credit score doesn’t have a lot of room to get any lower.

The length of time a bankruptcy stays on your credit report varies depending on the type of bankruptcy you file.  A Chapter 7 and Chapter 11 bankruptcy will stay on your credit report for 10 years, a Chapter 13 bankruptcy will stay on your credit report for 7 years.  I always tell my clients to pull a credit report 60-90 days after their bankruptcy discharge order has been entered by the Bankruptcy Court.  It’s very important to always look at your credit report subsequent to filing bankruptcy to ensure creditors aren’t misreporting a debt that has been discharged in your bankruptcy.  Discharged debts will have certain designations listed on your credit report that they were included in a bankruptcy and therefore the account is no longer valid or collectable. If you notice that an account is still be reported as delinquent or open, you must immediately contact the credit reporting bureau(s) and the creditor who has misreported the debt so it can be fixed.  An improperly reported debt will continue to wreak havoc on your credit score until it’s been appropriately addressed.

While filing bankruptcy does have a negative impact on your credit score, multiple collections and delinquent accounts reported on your credit report can be just as damaging. Notwithstanding, it only takes one creditor to accelerate your delinquent account to its’ legal department, whereupon the next step will be a lawsuit and pursuit of collection of a Judgment by way of a wage garnishment or attachment to personal or real property, which could include wiping out a bank account.  If you find yourself in this position, bankruptcy could very likely be a good option to consider to extinguish these debts and obtain a fresh start moving forward in life.

Whitney G. Coats, J.D., Of Counsel, is a bankruptcy attorney who works with Dana Law Firm’s Consumer Bankruptcy Department.


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