Will My Credit Score Improve If I File Chapter 7 Bankruptcy?

If you are dealing with massive debt and poor credit, you may wonder if Chapter 7 is the solution. Continue reading to learn more, and call Winterbotham Parham Teeple, a PC at 800.400.9000 for a free bankruptcy consultation with an experienced lawyer in California.

It Could Be The Quickest Way To Restore Your Credit

It can be frightening to declare bankruptcy when you know it will have a long-term impact on your credit score. However, if you currently have a low credit score and a lot of debt, you will need to make significant changes to improve your score. With constant monthly reporting of missed payments, high balances or charge offs, you may find yourself in a situation where your credit gets worse and worse every month with no clear path to improve it. Paying down your debt to may not be feasible at this juncture, so what can you do? Chapter 7 can assist you in doing both in wiping the slate clean so you can start to rebuild your credit as soon as your case concludes.

Your Credit Score Will Go Down Temporarily

Like most financial actions, your bankruptcy will appear on your credit report. This is a one-time negative action which may initially lower your score and will remain on your credit report for ten years. However, all revolving negative reporting that was lowering your credit score every month will stop, allowing you to work on rebuilding your credit in a way that would not be possible prior to your bankruptcy filing. As long as you take steps to rebuild your credit after filing, your credit score will start to improve and your bankruptcy will become less impactful over time. A qualified bankruptcy attorney can guide you on what steps will need to be done to rebuild your credit.

Keeping Your Secured Debt Will Help You Recover

Rebuilding your credit after the bankruptcy will be the key to improving your credit score and your financial health. Chapter 7 bankruptcy will discharge any eligible debt, but you do have the option to keep any secured debt such as car loans or secured household good loans for jewelry or furniture. This process is called Reaffirmation. For example, by reaffirming your vehicle, not only are you able to keep the car but it reinstates the loan with the lender so the lender will continue to report your monthly payments and immediately begin to improve your score.

Be Wary of Credit Repair

You may have seen advertisements for credit repair that promises to improve your score. Your credit report is a record of your financial history. Some less than reputable credit repair companies promise to removed negative reporting to improve your score. Keep in mind that you cannot get rid of past negative actions unless the reporting is inaccurate in some way. Bankruptcy filing will stop future negative reporting, since the debt is discharged in your Chapter 7 filing, but it cannot remove past actions. As such, companies which promise to remove your negative credit history are likely too good to be true. At best, they may be able to temporarily boost your score before it comes crashing back down. By getting rid of the debt through a Chapter 7 bankruptcy filing, you will be able to get rid of that debt for good so you can focus on rebuilding your financial health.

For these and other reasons, it is often true that filing for Chapter 7 is the fastest and easiest way to start a positive credit journey. To learn more, contactWinterbotham Parham Teeple, a PC at 800.400.9000 for a free consultation.