If you’ve accumulated debt and can’t pay it off, filing for bankruptcy could provide a much-needed clean slate. Before submitting the petition, however, it’s essential to consider the consequences of discharging the debt. Although declaring bankruptcy is the right move for many people, it’s essential to understand the impact it will have on your credit score. If you’re thinking about filing for bankruptcy, here is what you should know first. 

Understanding Bankruptcy’s Impact on Credit Score

If You File Chapter 7

Filing Chapter 7 will affect your credit score. If it’s already poor—between 300 and 579—because of missed payments, it may only drop by 50 or so points. However, if you maintained stellar credit—between 740 and 799—before filing, expect your score to drop by 150 or even 200 points. Additionally, the Chapter 7 filing will remain on your credit report for up to 10 years. As for the actual debts that are discharged, they should drop off within seven years. 

If You File Chapter 13

Like Chapter 7, filing Chapter 13 will cause your credit score to drop dramatically. Since you will end up paying back at least some of the debt, however, the bankruptcy will only remain on your credit report for seven years. However, because the repayment plan may be in effect for up to five years, the debts themselves could still be reported even after the bankruptcy has fallen off. If the repayment plan ends five years after filing, any debts that are then discharged could be reported for the next seven years, which means they might appear for up to 12 years after you actually submitted the petition. 

How to Rebuild Your Credit

You may not qualify for many credit cards immediately following bankruptcy, but you might be able to obtain a secured card. These cards are available to those with poor credit because they require a cash deposit, thereby reducing the lender’s risk. Using a secured card wisely will show lenders that you’re a reliable borrower when it comes time to apply for other types of financing. Store credit cards are also fairly easy to qualify for. Additionally, you may qualify for a car loan shortly after the bankruptcy if you can make a sizable down payment. 

If you’re thinking about filing for bankruptcy, turn to Greene Law PC to determine which type you’re eligible to pursue. A full-service firm in Farmington, CT, this practice is proud to help clients regain their financial footing. With 25 years in the legal field, they also assist with estate planning, family law disputes, personal injury claims, business organization, and real estate transactions. To request a consultation, call (860) 676-1336. To browse their bankruptcy services, visit their website.