The Positive Credit Impact of Bankruptcy

How Much Does A Bankruptcy Hurt My Credit Score?

The Law Offices of Fife & Cesta

By Thomas Cesta1811 S. Alma School Road,

Suite 270Mesa, Arizona 85210Office: 480-850-6541

Let’s face it, one of the biggest fears about bankruptcy is your future access to credit. A quick Google Search suggests that bankruptcy is going to drop your credit score by 100 to 300 points. But is that really true?The truth is that most people who are considering filing for bankruptcy have already been struggling to pay their bills, and many have been late on their payments multiple times, or they have stopped paying some or all of their bills altogether. Payment history with multiple late or unpaid accounts has already driven the credit score down. The bankruptcy may be the latest negative mark, but it is only a part of the reason for the lower score.Also, the lower the score is, the less the bankruptcy can impact it. FICO scores are from 300 to 850. But, a 300 is actually a very difficult score to get. There are 5 categories FICO considers to determine your score. You have to bottom out in every category to get 300. Most bankruptcy filers are already in the low 500s at the time of filing. And while bankruptcy is a negative mark as an adverse public record, it is a positive mark in that it not only reduces the amount owed, but it also stops the reporting of late payments.The Five FICO CategoriesIt is likely true that if you have a credit score of 800, that you can expect a 300

The Law Offices of Fife & Cesta | 1811 S. Alma School Rd. Mesa Arizona 85210 | 480-850-6541 | http://fifecestalaw.com/

point drop; but someone with a credit score of 800 that is considering bankruptcy is probably someone that has been robbing from their retirement accounts and savings to pay the creditors. And most of the time this is money they would get to keep in a bankruptcy. But if they do not file for bankruptcy, at some point the money will run out and the late payments will happen. When that starts happening, the credit score will drop anyway.Even if there is an initial drop in your credit score, the financial companies want you to believe that it is permanent. This ignores the element of time. In fact, any initial drop will be quickly erased because of positive changes, such as having less debt and no longer having late payments.Your credit score will not change overnight, but it will take less time than you think. Once the discharge is recorded, your credit score will begin to improve. The impact of the bankruptcy depends on how long it has been since the discharge was entered. Over time your credit score will go up even without doing anything.Reposted From: The Positive Credit Impact of Bankruptcy

The Law Offices of Fife & Cesta | 1811 S. Alma School Rd. Mesa Arizona 85210 | 480-850-6541 | http://fifecestalaw.com/