How Bankruptcy Affects Your Credit Score

The decision to apply for bankruptcy is never one that’s taken lightly and is often seen as a last resort. You may decide to opt for bankruptcy if your debts have grown to such a level that you have no real hope of paying them off. Though the ability to clear debts can be appealing, if you have any valuable assets that aren’t integral to your day-to-day life, you can expect to lose them, and you could even lose your home if your partner cannot purchase your share. You could have all your bank accounts closed – aside from a basic one used to pay bills – and you can expect people to find out about your new status as it will be made public. You can include many debts in your bankruptcy but won’t be able to clear certain obligations like court fines, child maintenance and student loans.

Your bankruptcy order will appear on your credit report for at least six years from the date of the order being made. Should you wish to borrow more than £500, you will need to tell the lender that you are or have been bankrupt, and you could find it extremely hard to get credit not just during the bankruptcy period but for many years after you are discharged. If you can find someone willing to lend to you after your bankruptcy, you may be charged higher levels of interest due to being regarded as a high-risk customer. If you are applying for a mortgage, you may be asked if you have ever been bankrupt, and will be obliged to tell the lender about it even if it has been absent from your credit report for many years.

Though most bankruptcies last for 12 months, they can last for up to 15 years if you fail to co-operate with authorities like the Official Receiver during the process, or if you act in a dishonest manner. Bankruptcy can also make you ineligible to take certain jobs, and potentially, your landlord can have you evicted if you become bankrupt whilst you are renting a property from them.

You can expect your chances of obtaining credit to rise once the bankruptcy disappears from your report. Some people have found it tough to obtain credit because their reports haven’t been updated, but help is available if you are no longer bankrupt and need the information to show that no outstanding balance is owed on certain debts. You may wish to add a short statement to your report if you feel potential lenders require additional context regarding your bankruptcy and debts. If you can obtain some credit whilst your bankruptcy shows on your file and manage it well, this may make it easier to obtain future credit, providing lenders with evidence that you are capable of repaying credit when it is due. A new mobile phone contract or credit card for people with poor credit histories can help you get your credit score back on track.

Call today on 0800 2545122 for more information about bankruptcy and legal help.

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About the author

Gerald Irwin

Gerald Irwin is founder and director of Sutton Coldfield-based licensed insolvency practitioners and business advisers, Irwin Insolvency. He specialises in corporate recovery, insolvency,
 rescue and turnaround.