Saturday, November 21, 2015

Does it matter what Bankruptcy does to your credit score?

Well ... does it matter? I guess it is the age old response, "it depends." One of the standard questions I get when I first meet new clients is, "What will this do to my credit score?" My response usually is, "What is your score now?" By the time people come to me, most of them already have severely damaged credit. My personal thought is the score no longer has a high priority at this point. 
I found this article - 3 Things Bankruptcy Does to Your Credit Score - and thought so what? The points the article makes are:

1. "Bankruptcy Causes Your Credit Score to Plummet ... It is one of the worst things you can do to your scores."  I do have clients that come to me and have kept their payments up to date so their score is high. But this is not the norm. Even if their scores are not affected, they cannot afford to take on anymore debt and they are crumbling under the debt they are carrying. Once a person gets beyond the point they can afford to pay his or her debt, significantly damaging his or her credit score is usually just a matter of time anyway.

Image courtesy of Stuart Miles at
2. "A Bankruptcy on your Credit Report Causes Long-Term Damage ... Having bankruptcy information listed on your credit report will impact your credit for years." Late payments, missed payments, repossessions, judgments and foreclosures do to. Every month you make a late payment, you extend the bad debt on your report. These events may not be as bad as bankruptcy but they impact a person's ability to access credit all the same.

3. "The Negative Impact on your Credit Diminishes Over Time ... A year (or two or three) after the date a bankruptcy first appears on your credit report, its impact will shrink until eventually, the bankruptcy information is removed from your credit report altogether and is no longer a factor in your credit scores."  This is the key and purpose of bankruptcy. The idea is to break the trend and reset finances. Once the debtor files bankruptcy and hits the reset button, he or she needs to work and take deliberate steps to rebuild his or her credit. At this point, credit score and rebuilding it becomes a priority again. Bankruptcy is a long-term process.
Here are a couple more articles on rebuilding credit after Bankruptcy:

Rebuilding credit after Bankruptcy

When will I be able to buy a new home after bankruptcy?

You can overcome bankruptcy

Debt What?

If people truly have the resources to pay their debts and can protect their credit score, they probably should not be filing bankruptcy in the first place. For those who truly are in over their heads, I would argue credit scores are irrelevant because they cannot use the score and it will ultimately drop anyway.

If you want assistance, legal representation, or just want to know more about Mark Medvesky or our firm of Wells, Hoffman, Holloway & Medvesky LLP, check out our website at

#bankruptcy #Chapter7 #Chapter13 #MontgomeryCounty #lawfirm #BucksCounty #Pennsylvania

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