How Does Bankruptcy Affect My Credit Score and Ability to Obtain Credit in Florida?

When bills pile up and there is no way to pay them down, what do you do? Many people opt for bankruptcy. Bankruptcy may seem daunting to some people, but it can be a great way to get a fresh start. In many cases, it can wipe out debt.

However, it is not all good times when it comes to bankruptcy. Bankruptcy can really do a number on your credit. It’s not uncommon for your credit score to drop by as many as 200 points. Additionally, obtaining loans will be next to impossible for the next seven to ten years while the bankruptcy remains on your credit report.

It may seem unfair that your credit score and ability to obtain credit are significantly impacted after a bankruptcy. After all, it seems like the equivalent of kicking someone while they’re down. Things just get worse and worse. You can’t get a car or a house. How will you survive?

The thing is, declaring bankruptcy shows that you cannot pay your debts. No offense, but this is a huge red flag for credit card companies and other lenders. If there is no guarantee that you could make your monthly loan payments, why would creditors want to take that risk?

Your ability to obtain credit is based on your credit score. Your credit score is based on several key factors, with your payment history being the most important. If you have already missed some payments and have bad credit already, then bankruptcy may not do too much damage. On the other hand, if you had good credit before filing for bankruptcy, your score will likely drop more significantly.

How Long Will Your Credit Be Impacted?

Chapter 13 bankruptcy affects your credit the least since you will end up paying off more of what you owe. It will remain on your credit report for seven years.

A Chapter 7 bankruptcy, on the other hand, does not require any payment. Debts are wiped away in a matter of months, and this does the most damage to your credit. As such, this bankruptcy will stay on your credit report for 10 years.

However, you don’t have to wait the full seven or 10 years to see improvements in your credit. Regardless of the type of bankruptcy, the negative impact will likely diminish over time, especially if you actively work to rebuild your credit.

Contact Our West Palm Beach Bankruptcy Attorney Today

Bankruptcy is a major issue that can affect your credit for many years. While sometimes it is a person’s only option, it is looked at poorly by lenders because you are considered a risk.

West Palm Beach bankruptcy attorney Brian K. McMahon, P.A. can help you understand the pros and cons of bankruptcy. Is it right for you? Call (561) 658-1789 or fill out the online form to learn more and schedule a consultation. We serve the West Palm Beach, Boca Raton, Port St. Lucie, and South Florida areas.