Quickest way to raise your credit score!
Posted March 15, 2010 by in
The most common question I am asked by a client considering filing for Chapter 7, Chapter 13 or Chapter 11 bankruptcy is "what will bankruptcy do to my credit score?" Before I get a chance to answer, the client usually answers the question themselves by saying something like "oh, I'm sure my credit score will be in the low 300's." These clients are always shocked when I tell them that they are not only wrong, but the opposite is true. In most cases, a bankruptcy filing will make a credit score go up, not down.
A credit score is just a measure of how likely a person is to repay their existing debt. With a lot of credit card debt and medical bills being unpaid, a person is not likely to be able to service their debt in a meaningful way and credit score decreases. However, if a Chapter 7, Chapter 11, or Chapter 13 is filed, all existing debt is either wiped off of the credit report, or is in some sort of repayment plan. After a bankruptcy filing, it is very likely that the debt will be serviced (especially in a Chapter 7 bankruptcy where you receive a discharge from all unsecured debt) and as a result, your credit score goes up.
Filing for Chapter 7, Chapter 11, or Chapter 13 Bankruptcy is the quickest way to see an increase in credit score!