Will Filing For Bankruptcy Ruin My Credit Score?

Barrios Machado

The better question to ask for most people with debt is: does it make a true difference what the actual credit score is? In other words, when individuals have lots of debt, having a good credit rating will not necessarily allow them access to new credit. And even if it did, what good is it to be able to borrow more money without a realistic ability to pay it back? This is a hole that generally keeps getting deeper.

But the simple answers to the question above are: it depends and not usually.

For those that have very poor credit ratings prior to filing bankruptcy, the filing of a bankruptcy can actually help a person improve their credit score.

A common scenario is to see a person with a score in 400-500 range see an increase of approximately 50-100 points approximately 12 months after the filing of a bankruptcy.


Simply put, it's like a sinking ship that has unloaded a bounty of dead cargo and is now resurfacing. The same happens when one discharges a large variety of old debt. Their credit rating is naturally allowed to improve again all on its own.

On the other hand, those with very high scores prior to filing bankruptcy, can expect to see a drop, but not as significant as they might fear. Sometimes the drop can be as little as 20 points. And the recovery from this is not as drawn out as most would expect.

One way to start rebuilding credit after a Chapter 7 discharge is to open a secured credit card (your own money on a credit card). Another way can include reaffirming or assuming certain contractual obligations (typically on vehicles).

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