How does filing bankruptcy affect my credit?

David Hillier

The impact of bankruptcy on one’s credit after the bankruptcy proceeding is concluded is a common question and concern.

Obviously, filing bankruptcy does not help your credit rating. It will definitely help your finances, in that debts will be discharged (eliminated) in the bankruptcy proceeding. However, credit reporting companies will keep the bankruptcy filing on your credit report for a period of 7 to 10 years.

(Of course, if you didn’t file bankruptcy, the debts would stay on your credit report for 7 to 10 years and you would still owe whatever money was involved.)

You can recover from a bankruptcy filing much more quickly than seven years. There are various techniques to accomplish this recovery. If you are continuing to make payments on a home mortgage and/or car loan, the continued payments will be a positive on your credit rating. Maintaining steady employment, not moving, (or at least not moving very often), and saving money are also positives which can be used to help you obtain credit in your post bankruptcy life.

Another relatively painless way to increase your credit score is to use a credit card (if you had any credit card with a -0- balance as of the time you file bankruptcy, these can be used) to charge normal expenses, such as gas for your vehicle. Charge $250.00 for gas on your credit card each month, pay it off at the end of the month, and your credit score will improve over time.

Reestablishing your credit can be accomplished usually between 6 and 18 months after your bankruptcy is concluded. Unfortunately, the rule of thumb in connection with obtaining a new mortgage is usually two years from the time your bankruptcy is concluded.

In summary, the impact of bankruptcy on your credit rating going forward is not nearly as bad as most people make it out to be. There are many strategies to accelerate the recovery of your credit standing.

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