Submitting a bankruptcy petition to a Connecticut judge may enable you to eliminate some or all of your outstanding debts. It may also enable you to put a stop to wage garnishments or other creditor collection efforts. However, seeking protection from creditors may also result in a significant change to your credit score. Whether your score goes up or down depends on variables that are unique to every case.
Why your score might go up
Eliminating debts that are several months past due means that you won’t have any late or missed payments on your credit report. If you have outstanding credit card balances, eliminating them will reduce your credit utilization rate, which is 30% of your overall score. Getting rid of other debts can also be helpful as the amount that you owe to creditors can also weigh on your ability to get credit.
Why your score might go down
If you have a high credit score, filing for bankruptcy may hurt more than if you have poor credit. This is because you probably don’t have late payments or other blemishes that will be wiped away through bankruptcy. It’s possible that your score will go down by up to 200 points by filing. Typically, the greatest impact will be felt within the first year or two after filing as lenders put more emphasis on what you’ve done over the most recent 12 to 24 months.
Bankruptcy stays on your credit report for years
A Chapter 7 bankruptcy will stay on your credit report for up to a decade while a Chapter 13 case stays there for seven years. The fact that you attempt to pay your debts through a Chapter 13 repayment plan accounts for the difference between the two forms of protection.
The exact impact of filing for bankruptcy won’t be known until you file your case and obtain a discharge. However, it may be possible to obtain new credit soon after your case is over even if your score goes down as a result of seeking protection from creditors.
