If you have considered filing for bankruptcy in Chicago, IL, you have probably heard someone say that it could permanently ruin your credit. While this is no more than an exaggerated misconception, it is important to understand that bankruptcy will have somewhat of an impact on your credit score. Since the bankruptcy will appear on your credit report for seven to ten years after filing, it could be difficult to obtain a substantial loan or a new line of credit for a certain period of time. Even so, you can expect your score to rebound in a timely manner if you take proactive measures immediately after your debt has been discharged. For this reason, the Chicago bankruptcy lawyer at Joseph P. Doyle encourages you to get all of the facts before disregarding this viable financial option.
Although it may be nearly impossible to predict just how much of an impact bankruptcy will have on your credit score, you may be able to gain a more accurate idea by looking at where your score currently stands. According to the information that FICO has released about the adverse effects of bankruptcy, someone with a pre-bankruptcy score of 780 could expect to experience a drop of about 240 points. When looking at someone with a score of 680, however, they may only lose around 150 points. Using this model, it can be deduced that a petitioner with a higher pre-bankruptcy credit score may experience a more significant loss. Even so, this should not be a reason to stray away from filing for bankruptcy if you are in a dire financial situation—as there is always time to rebuild your score later.
Many people assume that filing under one chapter over the other could more effectively protect their credit. According to FICO, the type of bankruptcy is actually irrelevant in this regard. It is important to understand, however, that creditors may look at one form of bankruptcy more favorably than another. In some cases, a creditor may be more willing to lend you money if you had filed for Chapter 13 bankruptcy, rather than Chapter 7. Since this process would require the debtor to reorganize their debt and make payments over three to five years, some say that this is the more "responsible" course of action—as Chapter 7 bankruptcy would rather eliminate one's dischargeable debt completely. This is not a steadfast rule, but it may be something to keep in mind when making the decision to file.
For further information, we encourage you to discuss your case with our Chicago bankruptcy attorney today. Call at (312) 957-8077 for a free initial consultation or submit a complimentary evaluation form online.