Will Bankruptcy “Ruin” My Credit Score?

No. As a Lakewood Bankruptcy Lawyer, most potential clients I meet with for the first time think that filing for bankruptcy will ruin their credit score. This fear forces many struggling consumers to limp along each month, paying monthly minimums, without a clear plan of how to rid themselves of expensive debts.

Well, the truth is that a bankruptcy filing usually increases a consumer’s credit score almost immediately. Banks and loan officers are eager to approve expensive loans to filers immediately after a bankruptcy discharge because after debts are wiped out in a Chapter 7, or adjusted in a Chapter 13, new creditors will be first in line for a consumer’s money.

People struggling financially likely already have distressed credit prior to calling me after missing a few payments. For these folks, I generally advise that they can expect a “repaired” credit score (600-650) about a year from a bankruptcy filing, and a “good” credit score (700+) after two years. So, bankruptcy is actually a positive first step in repairing most of my potential client’s credit scores.

Don’t Listen To Advice From Your Creditors – Focus On Your Budget

Banks and other creditors spend huge amounts of money trying to convince people how important credit scores are. Creditors do everything they can to make each payment seem urgent…by applying unhealthy stress to a family’s household. I have seen firsthand the damage this can do: broken marriages, domestic violence, and even thoughts of suicide. Corporate creditors apply this kind of pressure because it helps maximize their own profits. The loudest creditors make the most money when they get paid first, voluntarily.

As an advocate for my clients, however, I try to shift the focus to removing financial stress from my client’s household, permanently. If we can accomplish this, you will naturally have a good credit score. More importantly, you can save emergency cash reserves, invest in your retirement, and buy better food/housing/medical care for your family without the weight of old debts dragging your budget down.

Imagine that all your debts were gone, and you don’t owe anyone a dime. Would you be able to pay your other monthly bills based on your current income? If so, you are a prime candidate to consider a bankruptcy filing. For those of you in the Denver area, I’d be pleased to speak with you during a free, initial bankruptcy consultation.