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Credit scores and Chapter 7 bankruptcy

A major factor in any Tyler resident's decision whether or not to file for bankruptcy is the impact it will have on one's credit score. To be sure, bankruptcy does negatively impact a credit score, but it's not the only thing that does -- and it may be worth it in the long run. Let's take a look at how long it takes to improve a credit score, not as specific legal advice, but so that our readers will have a stronger background on credit scores as they weigh their options.

A credit score is a number that is intended to represent the likelihood that you will make timely payments on any debt you incur, based on your history of doing (or not doing) so. Creditors use this score when deciding whether to approve you for a loan or open a new line of credit for you. It takes into account things like how much you owe, how long your credit history is, whether you make payments on time and whether your credit history shows a large number of recent, new inquiries.

Of course, it also looks at whether you have filed for bankruptcy. A Chapter 7 bankruptcy filing will remain on your credit report for 10 years. That means that, for 10 years, you may find it difficult if not impossible to obtain certain kinds of loans or credit, as your credit score will be lower due to the fact of the Chapter 7 bankruptcy.

While this is something to think carefully about, it's also important to look at what your credit situation might be in 10 years if you don't file for bankruptcy. Individuals making barely the minimum payments on a number of high-balance, high-interest loans and credit card accounts may find that their balances won't be reduced in 10 years' time without some major changes. With Chapter 7 bankruptcy, many of your debts may be discharged, and the filing falls off your credit report after 10 years. Would you have been better off without that?

Of course, the answer will depend on each individual's circumstances. Some may be better off paying down their debts the old-fashioned way and protecting their credit score; others may need the fresh financial start that Chapter 7 bankruptcy can provide. It is up to the individual debtor to weigh their options, so they can choose the course of action that is right for them.

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Law Office of Gordon Mosley

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