Bankruptcy and Credit Scores

It is a myth that bankruptcy will ruin your credit.

Filing for bankruptcy will have an impact on your credit score. The exact amount of the impact will depend on several factors, including your current credit score, the type of bankruptcy you file, and how long it takes you to rebuild your credit after bankruptcy.

That being said, bankruptcy can also provide a fresh start for people who are struggling with overwhelming debt and are unable to pay their bills. If you are struggling to make ends meet and are considering bankruptcy, it is important to weigh the current negative consequences on your credit score against the potential benefits of discharging your debts and get a fresh start.

If your score is already below 630:

For most considering bankruptcy, their credit is suffering from late payments and high credit to limit balances. High balances and numerous late payments have a significant impact on a credit score and the ability to borrow or finance. Generally, the impact of a bankruptcy on credit is an improvement to high balances and late payments. 

Often, within as little as 30 days, a score may start to improve as creditors remove negative marks and high balances and report the bankruptcy instead. Lenders usually understand that once a bankruptcy is complete, their client is no longer in debt, can now afford to take on new liabilities, and cannot file bankruptcy again for many years. All in all, creditors prefer a bankruptcy on a credit report over high debts and a history of late payments.