What effect does bankruptcy have on your credit score?

First of all, you should know that bankruptcy can remain on your credit report for up to ten years. Other bad debts are removed after seven, but not bankruptcy. The impact that a bankruptcy filing has on your credit really depends on your credit report and score before filing. Many times people considering bankruptcy already have negative collections or bad debts on their report. So, they may already have a low credit score. Bankruptcy may not affect their credit scores as negatively as someone with a higher score. If you have a fairly high score and little bad debt listed, your score will probably take a quite a hit after filing your case.

How quickly your score improves after filing depends on you. After filing you will probably start to see lots of credit offers in the mail. Many financial advisors and bankruptcy attorneys suggest obtaining a low limit, secured credit card after filing. Use it on small purchases (like gasoline) and pay it off each month. And be sure to make all of your payments on time. This will slowly start to rebuild your credit. You can also look into obtaining a small line of credit from your bank or credit union. For some, the thought of obtaining new debt after filing for bankruptcy may be a scary thing. But, it’s a surefire way to slowly start rebuilding your credit.

You also want to ensure that your credit report is accurate after filing for bankruptcy. You can pull your credit report for free once a year at www.annualcreditreport.com. Pull your credit report and check that all of the debt that was included in your filing is reflected that way on your report. If something is incorrect, contact each of the three credit bureaus and get it corrected right away. You will need to send each of the bureaus copies of your notice of case filing, discharge notice, and schedules from your filed petition showing the debts that were included.

Rebuilding your credit after filing for bankruptcy can be a long process. But you just have to keep in mind that it is achievable. You didn’t get into financial trouble over night, so you can’t expect to dig out of it that quickly. It will take some time, patience, and hard work on your part. The bankruptcy gave you the fresh start that you needed. Now you just have to be willing to put in the work to get you back in a good financial position.

Blog Contributed By: Kelly Snyder

Credit Card Use Before Bankruptcy

If you plan on filing for bankruptcy, it is never a good idea to accrue new debt right beforehand. While it might be tempting, using your credit cards immediately before filing for bankruptcy can lead to complications that include not being able to discharge that portion of your debt.

The majority of credit card debt is dischargeable through filing for bankruptcy, however credit card charges of $600 or more in luxury items, charged within the 90 days prior to filing bankruptcy are considered non-dischargeable. A credit card charge that transpires within the 90 days before filing may not be discharged if the creditor can prove that there was no intention of paying back the debt. This also goes for cash advances.

Additionally, some creditors will look at overall credit card usage in the 6 months prior to filing and object to a discharge if the charges are excessive and appear to be done in contemplation of bankruptcy. So the best rule of thumb is not to use any credit cards right before filing for bankruptcy once you have met with an attorney and/or know you plan to file bankruptcy.

Cash advances and certain purchases that occurred immediately before filling bankruptcy can be perceived to be fraudulent. So if you purchased a computer, a new car or an expensive designer bag and plan on filing for bankruptcy, be mindful that a lawsuit from your credit card company objecting to your discharge may follow.

Be sure to inform your bankruptcy attorney of any purchases of $600 or more that you’ve made on your credit cards because in most instances it may be in your better interest to delay filing until after the 90 day presumption period has passed.

If purchases right before filing for bankruptcy are for necessities like food and diapers, typically your credit card company will be slightly more understanding. Using a credit card to buy essentials like food can also be a good indicator of financial distress to a credit card company. However they won’t be so understanding when the purchase is a luxury item, or if the necessities are excessive and total a lot of money.

If you are unsure about any purchases you’ve made within the 90 days before you are planning on filing for bankruptcy and are wondering if your credit card debt can be discharged, consult with your bankruptcy attorney for more information.

Heartland Law LLC 700 E. 8th #700 Kansas City, MO 64106 Phone 816-842-6700 Fax 816-337-3812 www.heartlandlawyer.com

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.

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