Do I Need a Credit Score for Bankruptcy Purposes?

By George Stargell, Senior Editor   

If you're considering filing for personal bankruptcy, your credit score may not seem like an important issue to you. And, honestly, it's not as important as, say, your current cash on hand or the amount of debt you're facing.

Still, your credit score measures your current monetary situation in the eyes of the credit industry, and it will affect your financial options in the future. Knowing where your credit score stands can help you prepare for the consequences of declaring personal bankruptcy.

How does my credit score affect me after bankruptcy?

Your credit score will take a severe hit if you declare personal bankruptcy. Bankruptcy can stay on your credit report for up to 10 years, late payments for up to seven years. These will drag down your score until you exhibit a long, uninterrupted history of on-time bill payments.

But your life doesn't end just because you file for bankruptcy — and neither does your credit history nor, in most cases, the need for continued lines of credit.

Lines of credit after bankruptcy

Such lines of credit typically include household utilities — heating, water, electricity, phone service, and possibly even cable service (depending on what you can keep in your bankruptcy proceedings).

In most cases, utility bills are too small to push someone into bankruptcy. But if you include unpaid utility bills in your bankruptcy filing, you can apply an "automatic stay" to those bills, preventing the phone, water, heat, and electricity companies from denying you service for at least 20 days.

However, after investigating your finances — including your credit score — utility companies can require you to pay off any outstanding debt and/or make a deposit for future service.

Beyond utilities, any credit card offers you receive (credit card companies are often willing to advertise to anyone) will take note of your lower credit score, driving your interest rate up.

Your credit score is not the critical issue in a bankruptcy filing, but it can have effects that linger long after bankruptcy. So when it comes to checking your credit score, forewarned is forearmed.