The Cassidy Law Firm Blog

Thursday, March 13, 2014

Monmouth County Bankruptcy: Will It Affect My Credit Rating?

For most people, deciding to file for bankruptcy is a decision that is not reached easily. On the contrary, most people try various solutions and explore numerous other options before finally deciding that bankruptcy is the best long-term solution. One of the reasons why people hesitate to consider bankruptcy as a solution to their financial problems is because they are concerned how bankruptcy will affect their credit rating. While this concern is understandable, the reality is that for most people their credit rating only suffers momentarily.

Most debtors who get to the point of filing bankruptcy have already seen their credit score suffer. Some, however, do manage to maintain a decent credit rating despite financial troubles that are significant enough to warrant filing bankruptcy. Regardless of where your credit score is when you file for bankruptcy, it will likely drop right after filing. Those with a higher score at the time of filing will see the most noticeable drop after filing. On average, a debtor will see a drop of 50-150 points in his or her credit score right after the petition for bankruptcy is filed. The good news, however, is that this drop in your credit score is usually only temporary. In fact, for many debtors their score will start to rebound within a few short months after filing.

Debtors who file a chapter 7 bankruptcy will generally see their score start to rebound shortly after the bankruptcy is discharged. Discharge, in a chapter 7 bankruptcy usually occurs about four to five months after filing. Your score may begin to rise after discharge because your debt to income ratio improves greatly. Once you eliminate the majority of your debts, your debt to income ratio improves assuming you still have a regular source of income.

If you file chapter 13 bankruptcy your score may begin to improve shortly after you start making monthly payments pursuant to your repayment plan. At that point, creditors are supposed to report you as paying on time, thereby helping to improve your credit rating. By the end of your chapter 13 bankruptcy you should have three years or more of on-time payments and should have paid off, or at least paid down, the majority of your debts.

If concerns over your credit rating have caused you to steer clear of bankruptcy as a possible solution to your financial troubles it may be time to consult with an experienced Monmouth County bankruptcy attorney to alleviate those concerns and find out how bankruptcy can help you.

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