What Will Bankruptcy do to Your Credit Score?

Are you considering bankruptcy and wondering what it will do to your credit score?

While there are varying views of whether it will hurt or help your score, most financial experts believe that your credit score will not be hurt nearly as badly as bankruptcy as by the circumstances leading up to it. Some believe that you should be looking more at your net worth to get a good picture of your financial health, rather than your ability to borrow in the future.

For most debtors who are involved in bankruptcy proceedings, they will find that obtaining new credit just isn't within their reach. Yet it can be helpful after filing for bankruptcy since it places all of your debts that are in the negative history into the "unenforceable" category. In fact, a debtor is a more positive credit risk after bankruptcy than before. Yet you should be aware that not all credit managers are aware of how bankruptcy really work and will only view it negatively.

It is important to remember that filing for bankruptcy will not erase the record of your debts. Credit reporting agencies are allowed to show an accurate history of your past and current financial affairs. The bankruptcy charge shows up on your credit history so that future creditors will understand that old creditors don't have legal claim anymore.

To learn more about how bankruptcy will impact your credit, contact our legal team to schedule a consultation with a Chicago bankruptcy attorney.