This question comes up often: will bankruptcy affect my credit rating and if so, to what extent? Indeed, declaring bankruptcy will have a significant impact on it.
This idea may prevent some people from considering this option. Let us try to demystify the consequences.
The impact of bankruptcy on credit score
Following bankruptcy, your credit rating will drop to the lowest level. If this is the first time, it will be weakened for 6 or 7 years after you release your debts. From a second bankruptcy, the duration is 14 years after the date of discharge.
Because your credit report will be affected, you may have a harder time getting credit for a period of time.
Bankruptcy: a viable option?
It is possible that bankruptcy may not be the best option for you. But its consequences on your credit rating shouldn’t stop you from considering it.
First, if you are thinking about going bankrupt, chances are your credit rating is already low.
Then, it is quite possible to improve your credit rating after you release your debts. Indeed, as this solution is part of a rehabilitation process, you can rebuild your credit in order to obtain a mortgage or another type of loan in the future.
Finally, think about the benefits of starting over and taking back control of your finances. Do these advantages outweigh the consequences for your borrowing capacity?
To finish
Bankruptcy will therefore have an impact on your credit rating for several years. In return, you erase all of your debts and give yourself a fresh start.
A Licensed Insolvency Trustee can help you break down the ins and outs of bankruptcy. He will analyze your situation and give you his recommendations as to the appropriate options in your case. Do not hesitate to contact a professional.
–
