RI Attorney Talks About Bankruptcy and Credit Scores

Some people hesitate to file for bankruptcy because they are afraid of ruining their credit rating forever.  This is unfortunate, as bankruptcy offers a fresh start to people overwhelmed by medical bills, credit card debt, mortgage payments, payday loan interest, and other financial burdens. Because of their fears about their credit scores, people are sometimes reluctant to take the first step toward a better financial future.

Bankruptcy Attorney John Simonian Answers Questions About Credit Ratings

For most people, the effect of bankruptcy on credit scores is temporary.  Most everyone who files for bankruptcy restores their credit back to a high score in about 12-18 months after their case is over. If you are trying to decide whether bankruptcy us right for you and learn how it affects your credit rating, call his office for a free consultation at 401-941-4800. You may also send an email to John@law-ri.com to learn more.

Why People Care About Credit Ratings

People with lower credit scores may have problems buying a car, obtaining a home mortgage, or renting an apartment.  They may be unable to obtain a credit card, and their insurance companies may raise premiums or cancel coverage entirely. These are a few of the reasons that people care about their credit scores, especially if they are considering bankruptcy. They believe that filing bankruptcy, whether it’s Chapter 7 or Chapter 13, will cause their credit scores to tumble and they will be permanently unable to participate in aspects of life so many others enjoy—owning a car or home, renting an apartment, or having a credit card.

Attorney Simonian Discusses Fears About Credit Scores

Clients in Rhode Island and Southeastern Mass. turn to bankruptcy lawyer John Simonian for answers to questions about bankruptcy and credit ratings.  Here are some of the questions that he frequently receives and his answers:

Will my credit rating go down if I file bankruptcy?

Yes, your credit rating will decline.  How much it will dip depends on factors such as the type of bankruptcy filing (Chapter 7 or Chapter 13), your credit score when filing, and other factors. On average, however, most credit scores will decline by approximately 120 points after a bankruptcy filing, unless the score already is low, then there may not much of a score reduction.

How long does it take for my credit score to rise after bankruptcy?

Although the bankruptcy will remain on your credit report for either seven or 10 years (depending on the type of bankruptcy filing), most people will begin to see improvement in the rating after 12 to 18 months. There are numerous reasons for this.  Some include:

  • The debt to credit ratio improves because much of the debt has been eliminated through bankruptcy or through your payment plan (if you filed for Chapter 13 bankruptcy)
  • Bankruptcy removes “delinquent” accounts from your credit report
  • You take steps to repair your credit after filing bankruptcy, such as obtaining a secured credit card

Attorney John Simonian has helped people begin saving for college or buy a home within the first two years after bankruptcy. He advises clients to not worry about credit scores after bankruptcy in the short term.  Rather, he encourages people to focus on what will be possible in the longer term—being able to save money to buy a house, put away money for children’s college, and putting money away for retirement. All of these goals are very possible when a bankruptcy filing frees you from paying bills each month.