Are you putting off filing for bankruptcy relief in order to avoid any damage to your credit score?  How long should you wait to file for bankruptcy relief?  This is a common discussion topic in our bankruptcy law practice.  Many of our clients are surprised by our response.

A healthy credit score has many benefits, including lower interest rates, better chance of loan approval, and maybe savings insurance premiums.  While we all strive for a strong credit score, the truth is that sometimes we need to focus on what is right in front of us as opposed to something well off into the future. 

Yes, filing for bankruptcy will negatively impact your credit score and will be reflected on your credit report for several years.  There simply is no hiding from this truth. Fortunately,  credit scores can be rehabilitated over time.  But what is your current credit score?  If you are currently in collections or if you have other delinquent credit accounts, it is possible that your current credit score is a bit low.  So, should you file for bankruptcy relief sooner or later?

One of my favorite quotes: “If you aim for nothing, you will likely hit nothing.”  This is sage advice in the realm of credit scores and bankruptcy.  By putting your bankruptcy off you can avoid imminent damage to your credit score, but at what cost?  Sure, it may feel better to have a low credit score as opposed to a much lower credit score.  But if your focus is to rehabilitate your credit score and get out of debt, then there is no better time to start than the present. Sure, filing for bankruptcy relief will have an immediate negative impact on your credit score.  However, a bankruptcy filing signals a fresh start and the beginning of your journey back to credit health. The road to strong credit may take time, but you have to start at some point.  The sooner you start rebuilding your credit, the sooner you will reach your goal of financial health.

Example:  Maddie has been putting off her bankruptcy filing for several months.  Afraid to damage her credit score, she continues to receive collection phone calls as well as notices of delinquency in the mail.  Her current credit score is below average, but not terrible.  She is getting used to hostile calls and other creditor harassment.

Growing tired of the collection calls, Maddie decides to file for chapter 7 bankruptcy relief.  She is afraid to look at her credit score as she knows it has dropped significantly after filing for chapter 7 bankruptcy relief.  Over the following weeks, Maddie notices that the collections attempts have stopped and that life has slowed down. 

As her sense of self-confidence returns, Maddie begins researching tips for rebuilding her credit. While the road to a healthy credit score takes time, Maddie feels good knowing that she is no longer just maintaining the status quo.  Today, Maddie is taking action and is rebuilding her credit score.  Maddie is getting her fresh start.