How Can I Repair My Credit Score After Bankruptcy?

Your credit score is an important number that determines your rate of interest on loans and credit cards. The question of what happens to your credit score in the event you file bankruptcy a common one in my Kansas City bankruptcy consultations. Filing for bankruptcy will affect your credit score, but just how it affects your score depends on a number of factors.

An important thing is to first understand is how your credit score is calculated. The most common score used is the FICO score. The score, the 3-digit number, is calculated using several different inputs. The largest portion of the score is based on your payment history (35%); followed by your overall debt level, or amount you owe (30%); the actual length of your credit history (15%); the number of inquiries, also known as new credit, (10%); and closed out by your mix of credit (10%). A detailed explanation of a FICO score breakdown can be found here:

http://www.myfico.com/crediteducation/whatsinyourscore.aspx.

If your credit score is already poor due to delinquent accounts, filing for bankruptcy won’t be a huge hit to your score. The reason for this is because once your debt is discharged, your creditors must update your credit report to reflect the account as being “discharged in bankruptcy” and must change the balance owing to “$0”, and all ongoing derogatory reporting must permanently cease. So the 30% portion of your FICO score which is "what you owe" will actually improve.

On the other hand, if you have remained current on all your payments and your credit score is immaculate, your credit score will take more of a hit after filing bankruptcy. However, many clients find that discharging the debt they may otherwise never be able to pay off is worth it. In the big picture, there are things you can do to improve your score after filing bankruptcy, and if you are facing debt that has become unmanageable, a temporary hit to your FICO score may be a worthy tradeoff for a more manageable financial future.

While filing for bankruptcy protection will affect your credit score, it may not be as negative as you assume. In the long term, bankruptcy can be the best path to a solid financial future. A good option is to consult with a lawyer who can look at your financial situation and give you options to consider, one of which may be bankruptcy.

Click these links to read more about how your credit score may be affected by bankruptcy: http://www.myfico.com/crediteducation/questions/bankruptcy-fico-score.aspx
http://www.lawhelp.org/documents/74261bankruptcy.html?stateabbrev=/az/#credit
http://www.ehow.com/how-does_4564668_bankruptcy-affect-credit-score.html
http://www.smartmoney.com/borrow/debt-strategies/declaring-bankruptcy-can-improve-your-credit-score-20681/

All the best~ Charice Holtsclaw,Kansas City, MO Bankruptcy Attorney.

Also serving Gladstone, MO; Liberty, MO;  Platte city, MO;  Riverside, MO; Independence, MO; Kansas City, KS; Overland Park, KS; Leawood, KS;  Shawnee, KS;  Shawnee Mission, KS; and Leavenworth, KS.

Follow me on Twittter @heartlandlawyer for all the latest updates!

Bankruptcy Myth: I Can't File at All

While the bankruptcy reform of 2005 did change a lot of things about bankruptcy, but it did not eliminate your ability to file bankruptcy at all. There are now income guidelines, known as the "median income" and if your household falls above the median income, you still may qualify for Chapter 7 bankruptcy.

Your attorney will use the "means test" to calculate your income minus allowable expenses, to determine whether by IRS standards you have disposable monthly income each month. If you do not, you pass the means test and can file Chapter 7. If you do not pass, you still have the option of filing a Chapter 13 bankruptcy to repay a portion of your debt (anywhere from 1%-100% repayment based on how much disposable income you have). Get the facts before ruling it out - go ahead and schedule that first consultation with your bankruptcy lawyer and see where you stand.

Contact us anytime to set up a consultation in Kansas City, MO; Gladstone, MO; Liberty, MO;  Platte city, MO;  Riverside, MO; Independence, MO; Kansas City, KS; Overland Park, KS; Leawood, KS;  Shawnee, KS;  Shawnee Mission, KS; and Leavenworth, KS.

Follow me on Twittter @heartlandlawyer for all the latest updates!

How Does Filing Bankruptcy Affect My Credit Score?

Your credit score is an important number that determines your rate of interest on loans and credit cards. The question of what happens to your credit score in the event you file bankruptcy a common one in my Kansas City bankruptcy consultations. Filing for bankruptcy will affect your credit score, but just how it affects your score depends on a number of factors.

An important thing is to first understand is how your credit score is calculated. The most common score used is the FICO score. The score, the 3-digit number, is calculated using several different inputs. The largest portion of the score is based on your payment history (35%); followed by your overall debt level, or amount you owe (30%); the actual length of your credit history (15%); the number of inquiries, also known as new credit, (10%); and closed out by your mix of credit (10%). A detailed explanation of a FICO score breakdown can be found here:

http://www.myfico.com/crediteducation/whatsinyourscore.aspx.

If your credit score is already poor due to delinquent accounts, filing for bankruptcy won’t be a huge hit to your score. The reason for this is because once your debt is discharged, your creditors must update your credit report to reflect the account as being “discharged in bankruptcy” and must change the balance owing to “$0”, and all ongoing derogatory reporting must permanently cease. So the 30% portion of your FICO score which is "what you owe" will actually improve.

On the other hand, if you have remained current on all your payments and your credit score is immaculate, your credit score will take more of a hit after filing bankruptcy. However, many clients find that discharging the debt they may otherwise never be able to pay off is worth it. In the big picture, there are things you can do to improve your score after filing bankruptcy, and if you are facing debt that has become unmanageable, a temporary hit to your FICO score may be a worthy tradeoff for a more manageable financial future.

While filing for bankruptcy protection will affect your credit score, it may not be as negative as you assume. In the long term, bankruptcy can be the best path to a solid financial future. A good option is to consult with a lawyer who can look at your financial situation and give you options to consider, one of which may be bankruptcy.

Click these links to read more about how your credit score may be affected by bankruptcy: http://www.myfico.com/crediteducation/questions/bankruptcy-fico-score.aspx
http://www.lawhelp.org/documents/74261bankruptcy.html?stateabbrev=/az/#credit
http://www.ehow.com/how-does_4564668_bankruptcy-affect-credit-score.html
http://www.smartmoney.com/borrow/debt-strategies/declaring-bankruptcy-can-improve-your-credit-score-20681/

All the best~ Charice Holtsclaw,Kansas City, MO Bankruptcy Attorney.

Also serving Gladstone, MO; Liberty, MO;  Platte city, MO;  Riverside, MO; Independence, MO; Kansas City, KS; Overland Park, KS; Leawood, KS;  Shawnee, KS;  Shawnee Mission, KS; and Leavenworth, KS.

Follow me on Twittter @heartlandlawyer for all the latest updates!