Bankruptcy and credit score

[livininma]

Hey guys,

My in-laws may be filing for ch 7 soon. I have a general question. They have excellent credit (740). However, a lot of this is due to juts constantly shuffling money around to keep up with minimum payments, and going more into debt each month. The only big negative on their credit report is high utilization but they never miss payments, etc.

Given that, how much will bankruptcy affect their credit score? Would it be impacted the same as someone who went into bankruptcy with poor credit?

[justbroke]

Their score will drop at least 100 points, maybe 150. No one should ever decide on filing based on what their bounce-back score will be. The debtor should worry about getting through discharge and then making lifestyle (and/or budgeting) changes in order to live within their means (and without using credit as a crutch).

Having wrote that, I will step off my soap box. The bankruptcy itself with limit the types of credit available to them. Their score should bounce-back quicker and higher (should be in 700s in around 2 years), but that really depends on how they handle credit in the future. So, I can't predict what their credit would be; I can only suggest that careful use of credit and slow rebuilding (low utilization) could get them back into the 700s in just about 2 years.

[Drazil65]

Hi, perhaps a better approach to "bounce back" is learn to live on cash period! No worries about credit score. Its a simple form of life and the quality is beyond words.

[frogger]

They have excellent credit (740). However, a lot of this is due to juts constantly shuffling money around to keep up with minimum payments, and going more into debt each month.

They have an excellent credit score, and they are broke, just like many of us were.

Your in-laws should not be concerned about a credit score at this point. They need to get their financial house in order, learn to live within their means, and the credit score will take care of itself in due time.

So many people base their situation upon that credit score. So many people fool themselves into thinking that a good score means their financial house is good.

So many people are wrong.........

[livininma]

They have an excellent credit score, and they are broke, just like many of us were.

Your in-laws should not be concerned about a credit score at this point. They need to get their financial house in order, learn to live within their means, and the credit score will take care of itself in due time.

So many people base their situation upon that credit score. So many people fool themselves into thinking that a good score means their financial house is good.

So many people are wrong.........

That's a good viewpoint I never really thoght about.

I"m more thinking in terms of getting them to really think about bankruptcy. For them the stigma is so enormous that I am trying to get them to see past that. Of course they ned to live off cash (and frankly, if they go bankrupt, they will be able to easily make ends meet) vs now where they are constantly shuffling funds to make ends meet, adding to their debt each and every month.

[frogger]

vs now where they are constantly shuffling funds to make ends meet, adding to their debt each and every month.

That's that cycle that never ends until they decide to do something about it. They should study up on this forum, read the stickies, read the posts, and while they have time (shuffling funds), plan this to their best benefit.

[AngelinaCat]

We had a credit score of 820 before we filed--better than that of Consumer Advocate, Clark Howard. That was just glorious, but we couldn't pay our bills and get out of debt.

The credit score is now in the mid 600s, and to us now means only 'diddly-squat'. We are on a 'cash only' basis now.

[ksgirl38]

This is very much like my situation. I had a credit score in the 700s and it fell about 100 points, but I'm back up to about 685 a year after discharge. There are other factors involved in obtaining credit so the credit score isn't the only thing looked at. Recently I was denied credit because I hadn't been with my current bank for more than 36 months. There are ways to help increase your score, but sometimes it doesn't matter what your score is.