SCHREIBER LAW OFFICE, LLC
HOW WILL BANKRUPTCY AFFECT MY CREDIT?
This is an understandable concern for most people, and it often depends on how good your credit is now. If you currently
have good credit, filing for bankruptcy will hurt your credit more than if your credit score already has negative marks on it.
It can be a difficult decision to weigh the benefits of a bankruptcy versus the impact it has on a credit score. The general
rule is the farther in the past your bankruptcy was filed, the more your credit score will improve.
In a study conducted by the Federal Reserve Bank of New York, it was determined that after 2 years, people with debt who
filed for bankruptcy had better credit scores than those who did not. Specifically:
“individuals who will eventually go bankrupt initially have lower credit scores….[h]owever, they experience a sharp
boost in their credit score after bankruptcy, whereas credit scores recover at a much slower pace for individuals who
remain insolvent. One quarter after bankruptcy, the credit score of bankrupt individuals exceeds the credit score of
insolvent individuals 1 quarters after insolvency by 40-80 points…. [And] the debt discharge associated with
bankruptcy leaves filers in a better financial position than individuals who become insolvent in similar circumstances.”
Insolvency After the 2005 Bankruptcy Reform, Federal Reserve Bank of New York Staff Reports, page 5
In summary, filing for bankruptcy does not make it impossible to obtain future credit, and as time passes it gets easier.
Even when there is a recent bankruptcy, future credit can be an option. Simply look at all the advertisements for car loans
that say “Bad Credit, No Problem” and “Bankruptcy, No Problem.”
MINNESOTA BANKRUPTCY LAW FIRM