What happens to my credit if I file bankruptcy?

Will Filing Bankruptcy Ruin My Credit?

 

When most people file bankruptcy, initially their FICO score will go down about 150-200 points. And
this is the kind of impact that a shortsale, deed in lieu, or a foreclosure on a home is likely to have on your credit score. Now, the fact that you filed bankruptcy will appear on your credit report for 10 years if you filed a Chapter 7 bankruptcy and 7 years if you filed under Chapter 13.

Does this mean your credit is ruined permanently? The short answer is no. While your credit score will go
down initially, with the bankruptcy discharge (wiping out most of your debts), you get a fresh start. You get a chance to bring your credit score back up everytime you pay your bill on time after the bankruptcy. Many people re-establish credit in about 1 to 2 years and maintain good credit thereafter.

Another thing to remember is that if you are considering bankruptcy, then chances are your credit score is
not very good to begin with. You probably have balances that are long overdue and/or some late payments. This is why, for many people, bankruptcy is not what ruins their credit but a starting point for repairing their credit.

 

 

The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice.  You should seek advice from a bankruptcy attorney for your specific situation.



Can I Keep One of My Credit Cards Out of Bankruptcy?

 

People often ask if it’s okay to leave one of their credit cards out of their bankruptcy because they
would like to keep it for emergency use.

First of all, if you have a credit card that doesn’t have a balance and hasn’t for some time, you don’t
need to list it on your list of creditors in bankruptcy.

If there is a relatively small balance on a card, then some people try to pay it off before filing
bankruptcy, hoping this would allow them to use the card after the bankruptcy.

There are two potential risks in doing this. Even though you are not carrying a balance, the issuer of
the card can check your credit, including the bankruptcy filing, and may think that you’re more of a risk and they may or may not close the account. More importantly, however, paying off one or more creditor prior to bankruptcy filing may be considered a “preference” (depending on the type of creditor and amount of payment), and the trustee can require those assets be brought back into the bankruptcy proceeding in order to be used for all creditors.

Many consumers are surprised when they receive numerous offers of credit immediately after their discharge in bankruptcy. (Credit card companies know that you don’t owe any debts now and
you won’t be able to file another bankruptcy for another 4 to 8 years.)

Most people get one or two cards with the lowest interest rates and fees and use them to help re-establish
their credit by paying off the balances each month.

 

 

The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice.  You should seek advice from a bankruptcy attorney for your specific situation.



Can I Max Out My Credit Before Filing Bankruptcy?

 

Maxing out your credit cards or making large purchases before filing bankruptcy is generally considered a bad idea. Similarly, cash advances in large amounts or balance transfers may be subject to scrutiny.

Here is the reason why.

While it is true that the bankruptcy law protects individual debtors, it is not a blanket protection. If you try to beat the system, a creditor might bring a “non-dischargeability” action in court. And if a judge finds that based on circumstantial evidence, the debtor had no intent to repay at the time of incurring the debt, it will not be discharged.

If you are considering filing bankruptcy and you are concernd about a recent purchase or transaction,
you should seek advice from an attorney specializing in bankruptcy law for further information.

 

 

The information contained on this site is for general education only and it is not, nor is it meant to be, legal advice.  You should seek advice from a bankruptcy attorney for your specific situation.