On Behalf of developers | April 5, 2021 | Chapter 7 Bankruptcy
Filing for Chapter 7 bankruptcy can have a significant impact on your credit score. However, there is no guarantee that your score will go down after your debts are discharged by a Mississippi judge. In the event that your score does go down, it may be possible to start rebuilding your credit as soon as your case ends.
Seeking protection from a creditor is an acknowledgment that you don’t intend to honor the terms of a loan agreement. If you have missed payments, late payments or other blemishes on your credit report, your credit score may already reflect the fact that you struggle to handle your debt obligations. Therefore, it’s unlikely that filing for Chapter 7 protection will cause it to fall much further. However, if you had good credit prior to filing, the fact that you’re seeking to eliminate your outstanding debt balances could result in a drop of up to 200 points.
Getting rid of credit card, medical or other types of debt will likely reduce your debt-to-income (DTI) ratio. Furthermore, eliminating a portion of your credit card debt will reduce your credit utilization ratio. Finally, filing for Chapter 7 bankruptcy typically allows you to settle debts that were significantly past due when you filed. Ultimately, these factors may counteract the negative impact a Chapter 7 filing could have on your credit.
If you are seeking debt relief in a timely manner, it may be a good idea to file for bankruptcy. An attorney may be able to review your case, help you file necessary documents and explain the potential benefits of taking such a step.