Filing bankruptcy in Illinois can help you get rid of your debts and start over with a clean slate. There’s just one drawback: You’ll have to deal with the damage to your credit score. The damage doesn’t have to be permanent, but it could affect your ability to get a loan or a credit card for several years.
How does bankruptcy affect your credit score?
When you file for consumer bankruptcy, your two options are Chapter 7 and Chapter 13. A Chapter 7 bankruptcy will remain on your credit report for the next 10 years, while a Chapter 13 bankruptcy will remain on your credit report for seven years.
Either way, your credit score drops when you file bankruptcy. The only way to build it up again is to form healthy financial habits, including:
- Living within your means
- Paying your bills on time
- Taking out lines of credit down the road
Some lenders might be hesitant to take you on as a borrower when they see a bankruptcy on your credit report. A secured credit card, which requires a security deposit, can be a great way to work on repairing your credit while establishing responsible behaviors like keeping your balance low and paying your bill on time.
What are the benefits of filing bankruptcy?
Filing bankruptcy has its drawbacks, but it might be what you need to get out of a bad financial situation. While it can cause an initial hit to your credit score, bankruptcy doesn’t stay on your credit report for the rest of your life. If you avoid debt, manage your money responsibly and form healthy financial habits, you could start building your credit again within a few years. An attorney may be able to offer you more guidance about filing bankruptcy, protecting your credit score and rebuilding your credit after bankruptcy.