How Long Does Filing Bankruptcy Affect My Credit? How Many Points Will it Drop?
If you have sizable debt and no other foreseeable way to pay
it off, you might have to consider filing bankruptcy. Unfortunately, when you
take this route, your credit score can take a nosedive. If you are considering
filing, you should know your credit rating ahead of time.
Of course, there are two different types of bankruptcy you can file as an
individual: Chapter 7 and Chapter 13. Generally speaking, the specific effects
of filing for either can differ depending on the circumstances. In any case,
however, if you have a good to excellent credit score of 700 or higher, you can
expect your credit score to fall by at least 200 points when you file
bankruptcy. If your score is only in the fair to good range, the dip is lower
at around 130 to 150 points.
Chapter 7 bankruptcy is in place to allow you to sell your non-exempt assets or
property. The purpose of this is to use the proceeds of these sales to
discharge your debt. People who file Chapter 7 usually do not have enough
non-exempt assets to pay off their debt, but the court will discharge debt,
which helps the individual. In addition, when you file Chapter 7 bankruptcy, it
stays on your credit report for a maximum of 10 years.
With Chapter 13 bankruptcy, you can discharge a good portion of your debt and repay
other debts throughout a set period, usually three or five years. When you file
Chapter 13, the bankruptcy will remain on your credit report for up to seven
years.
Overall, Chapter 7 has a worse impact on your creditors due to not being
required to pay them back. As a result, you are viewed as a higher credit risk,
which means that your credit score will drop more points when you file Chapter
7 bankruptcy as opposed to Chapter 13.
If you are in Virginia and are considering filing for bankruptcy, you need
Canfield Wells on your side. The Henrico VA bankruptcy lawyers will assist you
every step of the way. Contact Canfield Wells at your earliest convenience to
discuss your case with experienced Henrico VA bankruptcy lawyers.