Bankruptcy and Credit Reports

A person’s credit rating  credit rating has become very important in modern society, and in the twenty-first century credit rating agencies have perhaps become the equivalent of the ever present Big Brother, who kept the entire population in a state of fear, in George Orwell’s 1984. A low credit score will increase the rate of
interest a consumer pays on a loan, or in some cases prevent a person from getting a loan altogether. Insurance companies review credit ratings as part of their underwriting process,employers check credit scores when they are hiring a new employee and sometimes before they approve a current employee's promotion, and landlords will often refuse to rent an apartment to an individual who has credit problems.

Thus it is hardly surprising that one of the questions many people ask, when they consult a bankruptcy lawyers, is how  will a bankruptcy affect my credit score.  The simple answer is that bankruptcy shows as a negative item on your credit report, and it will stay on your credit report for ten years.


 However, as a practical matter filing bankruptcy will usually improve an individual’s credit score.  This is because  in most cases by the time an individual files a bankruptcy he or she usually already has a number of negative negative items on his credit score, such as missed mortgage payments, failure to pay the minimum charge  charge on a credit card, judgements, garnishments, etc.  When an individual files a chapter 7 or chapter 13 bankruptcy this goes on the credit report, but all these other items disappear from the report, and if she pays her bills going forward her credit will start to improve.

If an individual does not file bankruptcy on the other hand the late payments, judgments and garnishments will stay on his credit report until he catches up on these debts, and the reason most people consider filing bankruptcy is because they realize they are unlikely to be able to pay off these items in the foreseeable future.