Will Bankruptcy Hurt My Credit Score?

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The thought of having to file bankruptcy can be scary. Friends and family will tell you not to file bankruptcy because it will hurt your credit score. You may even read articles online written by well intentioned authors telling you not to file bankruptcy because it will hurt your credit score. So you may be wondering: “Will bankruptcy hurt my credit score?”Bankruptcy and Credit Score

Filing bankruptcy will not always hurt your credit score and in fact, in many instances it can actually help you credit score. You may find that last statement hard to believe but it is true. It all depends on where your credit score is when you file bankruptcy. So the first thing to do is look at what your credit score is right now. This may be something you have been avoiding, but it is the first step on the road to financial freedom. You must face your situation.  One place that I recommend you start is to set up a free account at Credit Karma. You can get to their website by going to www.creditkarma.com.

Now that you have your credit score, let’s talk about how bankruptcy will affect your credit score. If you are starting with a credit score of 700 or higher, bankruptcy will definitely affect your credit score and make it go lower. However, if you are like most of my clients and are starting with a credit score below 600, bankruptcy will likely not hurt your credit score and will probably help your credit score. I will give you a real life example from one of my clients. In 2013 his credit score was 498 right before filing bankruptcy. Twelve months after the bankruptcy was filed, we checked his credit score again and it was 639! His score had gone up 141 points AFTER he filed bankruptcy. It gets even better. We checked his credit score again in another twelve months, so two years after filing bankruptcy, and his credit score was 716! In just two years after filing bankruptcy, his credit score went from 498 to 716.

I must inform you that this doesn’t happen in every situation, but my experience is that in the vast majority of cases, if you start with a credit score under 600, you can achieve a credit score of over 700 within two years of your bankruptcy filing. Of course there are some simple steps that need to be followed and you must not get back into a pattern of maxing out your credit cards after bankruptcy or having late payments after bankruptcy.

So if you have been avoiding filing bankruptcy because you think it will hurt your credit score, get your credit score at Credit Karma and then give me a call so we can see if bankruptcy is the right option for you.

I can be reached at 480-809-1014 or you can email me at richard@dworniklawaz.com.

 

 

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