What Happens to My Credit Score after I file a Chapter 7 Bankruptcy Case

Posted by Kevin Ryan | Feb 17, 2017 | 0 Comments

A common myth concerning the bankruptcy process is that it will ruin your credit forever.  This is simply not the case.   Consumer credit reports follow an alogorithm that is constantly changing.  An actuary firm called Fair Isaac Corp employs mathmeticians to create formulas that are geared towards helping credit providers find the most qualified customers.  There are some general constants that apply to credit reports, and these constants translate into actions you as a consumer can take post-bankruptcy to help raise your credit score.   

The filing of a bankruptcy case itself will not permanently damage your credit score.  The bankruptcy filing itself is noted on the credit report as a "public record" filing for up to 10 years.   The debts that are discharged get marked at "discharged in bankruptcy" when the Court issues its discharge order.    

When the Bankruptcy Court issues the Discharge Order, which at the soonest is 90 days after the case is filed, it is usually noted on your credit report within thirty (30) days.    This means that all the negative points assigned to past due payments, high balances, judgments, evictions, foreclosure, etc. no longer have any negative affect on the credit score.  The Debtor needs to have something active and paid timely post discharge to help the credit score rise to a level over 640, which is about where you need to be to qualify for a decent auto loan in the future.  It would not be impossible to get your score back up to
700 about 6 months to 12 mos after you receive the Discharge, so long as you pay attention to it, and get 1 or 2 new debts on there that you pay off each month.  
Entering into a reaffirmation agreement with an auto lender and  a mortgage lender are common ways for a bankruptcy debtor to immediately begin the process of increasing the credit score post-bankruptcy discharge, in the context of a Chapter 7 case.   A reaffirmation of a debt such as an auto or car loan will keep the debtor's personal obligation under the terms of the promissory note from being discharged.  This results in the reaffirmed debt remaining on the debtor's credit report as an active debt.  So long as the debtor continues to pay the reaffirmed debt, there will be a normal positive effect on the credit score going forward.   Of course, if the debtor fails to make payments, this will negatively impact the credit score.   Reaffirmation of a debt in a Chapter 7 bankruptcy takes careful consideration, and should only be considered in the case where the terms of the loan being reaffirmed are reasonable.  In some cases the lender will agree to lower the interest rate and in rare cases, wipe off some of the principal balance of the debt.  
There is a good summary of all this available at creditkarma.com or at www.experian.com     Dave Ramsey has a good book on the ins and outs of consumer finance, as does the 
"For Dummies" series available on amazon.com ( title:  Consumer Finance for Dummies).   

About the Author

Kevin Ryan

"I'll never be the kind of attorney your creditors want me to be. I'll always be the kind of attorney you NEED me to be. Call me. I'll BE there for you. And I'll make them go away."  -Kevin Ryan, Attorney at Law Kevin Ryan is a graduate of the College of Wooster and the Cleveland Marshall College of Law. He is admitted to practice before all Alabama State Courts, the United States District Court for the Southern District of Alabama, and the United States Bankruptcy Court for the Southern District of Alabama. The United States Bankruptcy Court is a part of the United States District Court. Since 1998, Mr. Ryan has represented thousands of individual clients in bankruptcy, criminal, divorce, probate, personal injury, and real estate matters.  Attorney Ryan is also a licensed real estate agent in Alabama.  He handles  Bank-owned properties, short sales, and conventional sales in addition to conventional real estate listings.   This wide range of experience enables Attorney Ryan to take a wider look at your legal matter. It is important to consult with an attorney who can see from experience how other legal issues may affect your situation, and advise you accordingly. Personal Info Kevin Ryan is a member of First Baptist Church in Silverhill, Alabama. He resides in Silverhill with his wife Jessica and their three children. Committed to helping our Clients achieve a fresh financial start Our practice focuses primarily on consumer bankruptcy matters under Chapter 7 and Chapter 13 of the United States Bankruptcy Code.  Our law practice also includes matters where bankruptcy litigation, appellate work, or involvement in civil lawsuits is needed by a client.     No representation is made that the quality of any of these legal services is of higher quality than another attorney or law firm.   The United States Bankruptcy Code requires the following notice:  We are a Debt Relief Agency, which means we help people get legal relief from their Debts through the bankruptcy process. Interested in learning more about our bankruptcy attorney near Mobile, Alabama? Contact Us for help with chapter 7 bankruptcy or chapter 13 bankruptcy in Mobile, Baldwin and Washington counties. Education Juris Doctor, Cleveland Marshall College of Law, 1997 Employed full time as a paralegal while attending law school in the evenings. B.A., The College of Wooster, 1994 NCAA Div.III All Conference (N.C.A.C.) Football Team : Defense 1993; Most Inspirational Senior Award 1993; Co-captain 1993; Letterman 1991-1993; Phi Sigma Alapha Fraternity 1991-1994; Athletic Director Jurisdictions Admitted to Practice Alabama


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I'll BE there for you.

I'll never be the kind of attorney your creditors want me to be. I'll always be the kind of attorney you NEED me to be. Call me. I'll BE there for you. - Kevin Ryan, Attorney at Law