Will a bankruptcy hurt my credit score?
Surprisingly, a bankruptcy can actually increase your credit score if you score is low. A credit score is based on your debt to income ratio. If you have high debts and low income your score will be low. Filing for bankruptcy will allow you to get rid of all applicable debts like credit cards, small loans, etc. By ridding yourself of these obligations, your debts decrease and your score increases. Obviously, we do not advise filing a bankruptcy without the need to actually file one, but the simple fact of filing a bankruptcy can actually help your credit score in certain situations. To file for the most common type of bankruptcy, known as a chapter 7, you must pass the means test for an individual. If you pass this test, you are allowed to file for this type of bankruptcy. If you cannot qualify for a chapter 7, you can file for another type of bankruptcy known as a chapter 13. This type allows you to repay a portion of your debts over a period of 5 years. The amount that you will pay back is determined by your bankruptcy trustee. Regardless of the type of bankruptcy you file, this is a very important decision and you should speak to an attorney about your options. For more information about this or any of our legal service areas, please call us for a free legal consultation!