How Will Bankruptcy Impact My Credit Score?

 Posted on April 23, 2025 in Bankruptcy

The most obvious among the benefits of bankruptcy is the relief that comes from removing or reducing oppressive debt. However, it will negatively impact your credit score, immediately and in the long term. The good news is that this is not a permanent change. Exactly how your credit score and report are affected depends on the type of bankruptcy you file. An experienced Brazoria, TX bankruptcy attorney can explain the legal options you have for bankruptcy, the pros and cons of each, and the factors considered when deciding which type of bankruptcy best suits your situation.

What Happens to Credit Immediately After Filing for Bankruptcy?

Chapter 7 and Chapter 13 consumer bankruptcies are the two most commonly filed. Immediately after you file, meaning within the first few months, you can expect to see a drastic dip in your credit score. The reasons for this nearly instant drop include:

• Each account that is part of the bankruptcy is closed and given a negative status.

• The credit utilization ratio will change because your balances will remain while your limits decrease.

• Missed payments will still show up on your payment history.

• You will have a public bankruptcy filing on your credit report.

The exact amount that your score will drop varies from person to person and depends on what your score was before you filed. For some, the score may go down 50 points, and for others, it can be as much as 150.

Is Chapter 7 or Chapter 13 Worse for a Credit Score?

A Chapter 7 bankruptcy will likely have a more negative impact on your credit score. This is because it is a liquidation bankruptcy, eliminating debt by selling certain assets to repay creditors and wiping the slate clean for a fresh start. A Chapter 13 is slightly less impactful because it restructures debt, rather than eliminating it. Instead of showing your accounts as fully defaulted, as a Chapter 7 would, a Chapter 13 allows you to pay off debts on more sustainable terms and under court protection.

How Can You Rebuild Your Credit Score After Bankruptcy?

According to the Fair Credit Reporting Act, reporting agencies are not allowed to include your bankruptcy on your credit report after 10 years from the date that your case was filed. This is only three years longer than other information regarding bad credit. However, you can begin to rebuild much sooner. Some ways to boost your credit include:

• Keeping the balances on new credit accounts low

• Never missing a payment on any debts

• Limiting inquiries into your credit

Just giving it time is the most effective strategy. As long as you do not default on any other accounts, your credit will slowly increase over time. If you prefer to optimize that time, you may seek counsel to help you build a strong credit strategy.

Schedule a Free Consultation With Our Houston, TX Bankruptcy Attorneys

At The Fealy Law Firm, PC, we focus on helping our clients through hard times and ensuring they have the opportunity to take care of their families. Speak with our Conroe, TX bankruptcy lawyers to learn more about the benefits of bankruptcy and how it could be the right choice for you. Call 713-526-5220 today to schedule a free first meeting with a compassionate legal representative.