Bankruptcy Will Actually Improve Your Credit Score

Nearly everyone considering filing for bankruptcy worries about the effect it will have on their credit score. A common misconception is that a bankruptcy will ruin a person's credit. However, this is usually not the case. Most people will actually see a boost in their credit score immediately after filing for bankruptcy.

How can this be true? Most people who need bankruptcy relief already have low credit scores and have credit reports that show high balances, late payments, charged-off accounts, and accounts in collections. After filing for bankruptcy, your credit report is wiped clean. Your high balances, late payments and records of unpaid debts are removed. Instead, the accounts will be marked as "Included in Chapter 7 Bankruptcy" or "Included in Chapter 13 Wage Earner Plan" depending on which type of bankruptcy you filed.

Bankruptcy will also help you improve your credit score in the long term as well. Most people do not realize that credit scores are set up to grade someone's credit as compared with other consumers in a similar financial position. In other words, when you file bankruptcy your credit score is determined on how you compare with other bankruptcy filers and NOT compared with individuals with perfect credit. Though it may be difficult to have a perfect score of 850, a credit score in the 700s is common for past bankruptcy filers who manage their credit.

If you have any questions regarding bankruptcy, contact 1st California Law Inc at (949) 735-8499 for a free attorney consultation.

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