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Bankruptcy and Credit Scores


Bankruptcy and Credit Scores

One of the biggest concerns people express to me is that they have or more often, had, a great credit score, and they want it back.  Great.  That is a worthy goal.  A good or great credit score helps you get the best rates on a mortgage, helps you with a car loan.  A good credit score may also help you land a better job. So, how can Bankruptcy Rebuild Credit Scores?  Let’s talk about that.

When you come to the Grafton Firm, saddled with debt, falling behind or already helplessly behind, and your chief concern is your credit score?  My advice is to take a step back and look where you are.  Either your credit score is already tanking and you need to take action to stop the bleeding and start reversing the trend or your credit score is still hovering in the good range, but you’re stretched beyond your means.  At this point the only way to “save” your credit is to pay off your debt and fast.  Otherwise, we’re looking at rebuilding credit.

Here’s how I often describe this to my clients:  Think of your credit as a building.  It may have been a modest home, or it could have been a soaring skyscraper.  Now, it’s either a pile of rubble or has serious structural defects.  You need to rebuild, but you can’t do that on top of the faulty structure or the pile of rubble.  You have to clear the foundation first.  You can’t restore your credit while there is still ongoing late payments, collections, or even judgments being reported.

Can Bankruptcy Rebuild My Credit Score?

The short answer is yes.  But the hard truth is that your credit is going to take a major hit.  How bad?  I can’t tell  you that.  Credit Scoring is an extremely complicated thing that is based on a SECRET and proprietary formula.  The one that people know most is the FICO score.  This is based on a secret formula developed and maintained by the Fair Isaac Corporation.  They won’t tell me, you, or anyone else the exact impact that bankruptcy has, but that’s ok.  I can tell you that in my years of practice, it has an immediate negative impact on credit and by law it can be reported on your credit for 10 years.  The impact, however, begins to diminish soon after your case is closed.  More importantly.  All those negative items that were getting worse and worse as time went by and you couldn’t pay your debts.  They stop getting worse.  They don’t go away, but they stop getting worse.  Then all of your balances revert to $0.00 for all of your dischargeable debt.

Suddenly, what you have is a bruised and battered credit score, but one that is ready for a new foundation, for new growth. Bankruptcy and credit scores can co-exist, and used as a tool, Bankruptcy can be the implement to grow your score in the long run.

At the Grafton Firm, we are not just Maryland Bankruptcy Lawyers.  We’re also counselors and advocates for our clients.  We understand you have hopes and goals for your financial future.  We pride ourselves on helping our clients past discharge, offering ideas and suggestions on ways to begin to rebuild their credit-worthiness.

We do not engage in credit repair.  In my opinion that’s a dangerous field more apt to hurt than help.  Instead, what we offer is the guidance of 20 plus years experience navigating credit and debt issues for ourselves and our clients.

About the Author:  William Grafton is a Maryland Bankruptcy Lawyer and Co-Owner of the Grafton Firm, LLC.  He has written, lectured, and educated on credit related topics for nearly 15 years and is happy to be bringing his expertise to the Baltimore Metro area.

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