Making the decision to file for bankruptcy—whether it is chapter 7 or chapter 13—is not an easy one for any Schaumburg, IL resident. But sometimes, when you are simply unable to pay off your debts, it is the best option. You should be aware, however, that when you file for bankruptcy your credit score will take a pretty big hit. The bankruptcy will be a part of your credit report for quite some time.
Different Types of Bankruptcy
There are two different types of bankruptcy available for most consumers: chapter 7 and chapter 13. Those who file chapter 7 are able to discharge all or most of their debts. Those who file chapter 13 are able to make payments to pay off some or all of their debts. Both types of bankruptcy will be part of your credit report.
How Damaging Is Bankruptcy to Credit Score?
A good credit score of 700 or more will likely drop by at least 200 points when filing for bankruptcy. If your credit score is lower than 700, bankruptcy will probably cause it to drop a bit less, perhaps between 130 and 150 points. The bankruptcy will remain on your credit report for a number of years, but its impact will lessen over time.
Rebuilding Credit After a Bankruptcy
Although your credit score will be damaged after filing for bankruptcy, the good news is that you can rebuild your credit.
Take the following steps in the months following your bankruptcy filing:
- Make sure the bankruptcy was reported correctly by pulling your credit report. If there are inaccuracies on our credit report, get those corrected.
- Apply for a secured credit card to help rebuild your credit with a positive payment history. Make sure to pay everything on time and keep debt levels low.
- Keep track of your progress by periodically pulling your credit report.
Contact Our 60194 Law Firm
If you’re considering Chapter 13 bankruptcy, don’t make a decision until you talk with a Schaumburg, IL lawyer such as Robert M. Kaplan. Call today for a consultation!