There is a good chance that filing for bankruptcy will have an impact on your credit score. However, it’s possible that your score will actually increase after your debts are discharged by an Alabama judge. This will depend on what your credit score was before you filed, and it will also depend on if there were any major blemishes on your credit report when this occurred.
Why your credit score might go up after your case is discharged
If a debt is eliminated in bankruptcy, it will generally be listed as paid or closed on your credit report. This is much better for your credit score than having a balance listed as past due. Furthermore, after a balance is eliminated, your debt-to-income ratio will go down, which will further help your score and overall creditworthiness. Finally, if a credit card debt is wiped away, your credit utilization rate will decrease, and this can further bolster what might be the most important number in your adult life.
Why might your score go down after a bankruptcy?
Your credit score is more likely to go down after seeking protection from creditors if you had a high score prior to doing so. The same might be true if you didn’t have any past due payments, repossessions or other negative marks on your credit report.
Your credit score will likely rebound within two years after a discharge
In most cases, credit scores tend to improve after a person obtains a discharge in a bankruptcy proceeding. This is because those who file for bankruptcy tend to have less access to credit immediately after obtaining a discharge. Therefore, you’ll likely find it harder to overextend yourself immediately after your case is resolved. This can significantly reduce your risk of missing payments or doing anything else that could hurt your reputation with lenders.
If you are struggling to repay your bills, filing for bankruptcy may be in your best interest. Depending on your current circumstances, doing so could improve your credit score, which could help you build a stronger financial future.