Thursday, November 11, 2010

The Effect of Bankruptcy on Your Credit Score

If you end up filing a Chapter 7 or Chapter 13 Bankruptcy, expect your credit score to dip at least 200 points.  All of your past open accounts will show that they're included in the bankruptcy, and you'll essentially have no liabilities.  In the case of a Chapter 7 Bankruptcy, all of your debt is eliminated after the sale of your assets.

Besides the dip in your credit score, the bankruptcy will show up as a public record on your credit report.  Even if you do build your credit score into the high 600's and low 700's 2-3 years after bankruptcy, which is totally doable, your bankruptcy will still be listed.  A Chapter 7 Bankruptcy will stay on your credit report for 10 years, and a Chapter 13 Bankruptcy will stay on your report for 7 years.  If they show up any longer than the stipulated time, you can appeal to the credit bureaus to have them removed.

However, years after these public records are removed from your report, creditors such as American Express keep records on those who have had their debts discharged via bankruptcy no matter how long ago it happened.