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The Effects of Bankruptcy on Your Credit Score

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By : Sonia Smith    99 or more times read

If you plan to declare bankruptcy, most probably you already have several dings on your credit and is left wondering how much further your score will go down when you declare bankruptcy. Furthermore, it is so public and could have an adverse effect on your reputation, published on the local papers and the proceedings are held in open court.

Although it allows you to wipe out your debts, it does not definitely clear your credit report right away. Your score will immediately fall up to 300 points after declaring bankruptcy, depending on how long you wait to file after failing to pay your debts.

It is important to ascertain the bankruptcy effects on your credit score and ratings, which includes your personal standing and plans for the future. Remember that your credit score is not only necessary in getting a mortgage or other credit purposes but also for insurance, other utilities and employment purposes as well.

Once you are declared bankrupt, you should also declare this when you apply for a loan of $1000 or more. Failure to do this is considered as a criminal offense. Bankruptcy record also makes it more difficult for you to manage a business since securing a credit is practically impossible.

Bankruptcy declaration also impacts your ability to get a new job, secure a different loan or mortgage and even on a new rental. Depending on the types of debts that you have, filing for bankruptcy may be unclear and does not make any sense to you, so you should talk to a bankruptcy lawyer or secure a free bankruptcy review for more information.

While it is true that a bankruptcy on your credit report and score will be taken into account by possible lenders, there are discharges that have a worst effect on your score than collection accounts. These remains on your report for years.

The extent on which your score is affected will depend on the bankruptcy chapter that you filed. Chapter 7 bankruptcy remains on your credit report for ten years and a Chapter 13 bankruptcy declaration will remain on your credit report for seven years. When filling up personal financial statements what contain a question on whether you have declared a bankruptcy, you will have to answer “yes” or else failure to do so it considered as fraud in most cases.

The remarkable thing when filing for bankruptcy is although a Chapter 7 does more damage to the creditors involved, most probably you will be extended a credit or loan three years later. This is simply because your score is just one part of your credit score and report and no debt or a disposable income if more important to your credit worthiness than the marginal benefit of a Chapter 13 bankruptcy.

If you have filed for bankruptcy recently, you will be declined on various loans, mortgages and offers on credit cards. Those who are declared bankrupt are considered as high risks by default and while they are approved of some kind of loan, they are still subjected to the highest interest rates.
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