What Is the Impact of Chapter 7 Bankruptcy on My Credit Score?

You need to consider numerous things before filing for Chapter 7 bankruptcy. There will be an impact on your credit score. However, you may find that the benefits of Chapter 7 bankruptcy far outweigh the cons. Working with an experienced attorney, you may find that Chapter 7 bankruptcy is the best option.

The main benefit of Chapter 7 bankruptcy is that some of your debt may be discharged after the process. The debt discharge comes at a cost. Many of your assets would become part of the bankruptcy estate used to pay creditors.

You will end up with somewhat of a clean slate financially. When your debt is discharged, creditors have lost what they have lent you. Future creditors should know there may be a risk in lending you money based on your track record because you did not pay the discharged debts.

The Bankruptcy Becomes Part of Your Credit Record

Your Chapter 7 bankruptcy will be on your record for 10 years. At first, your credit score will be a rather large hit. Some experts estimate that your credit score could drop by as much as 200 points when you declare Chapter 7. The impact of a Chapter 7 filing is more significant than a Chapter 13 because your debt is being discharged instead of restructured.

The exact hit to your credit score will depend on several factors, such as the debt you had discharged and your score before you declared bankruptcy. Chances are that your credit score was already low because of your financial difficulties. There will be a significant impact on your score at first, making it more difficult for you to get new credit.

You Can Begin to Rebuild Your Credit Slowly

The good news is that, while the bankruptcy stays on your record, the effect of it will dissipate over time.  Creditors will be able to see that you declared Chapter 7 bankruptcy, but they will also be able to know that you have slowly begun to rebuild your creditworthiness.

Once your Chapter 7 bankruptcy has concluded, you should begin to focus on the future. You may have had financial difficulties, but it is not the end of your financial story. Over time, you can take small steps to reestablish your credit, such as taking out small new accounts. Although it will take some time, you can rebuild your credit after a Chapter 7 bankruptcy. You may even find that your score will gradually increase as you rebuild.

You cannot erase all evidence of the Chapter 7 bankruptcy. As such, this would be one of the cons you would weigh when filing for bankruptcy. An experienced attorney can point out what you must consider as part of your difficult financial choice.

Contact Our Experienced Baltimore Bankruptcy Lawyers at LeViness, Tolzman & Hamilton

Contact our Baltimore bankruptcy lawyers at LeViness, Tolzman & Hamilton if you are in financial distress. Call us today at 800-547-4LAW (4529) or contact us online to schedule a free consultation.

We have offices in Baltimore, Glen Burnie, Lanham, and Owings Mills, allowing us to represent clients in Maryland, including those in Anne Arundel County, Baltimore County, Carroll County, Harford County, Howard County, Montgomery County, Maryland’s Western Counties, Prince George’s County, Queen Anne’s County, Southern Maryland, and the Eastern Shore, as well as the communities of Catonsville, Essex, Halethorpe, Middle River, Rosedale, Gwynn Oak, Brooklandville, Dundalk, Pikesville, Nottingham, Windsor Mill, Lutherville, Timonium, Sparrows Point, Ridgewood, and Elkridge.