MN Bankruptcy and Credit Scores: What Is the Real Truth?

Posted by Jake Peden on March 30, 2021 at 6:15 AM
Jake Peden

“What effect will filing bankruptcy have on my credit score?” is probably the most common question I get during my first consultations with Minnesotans. My response starts with: “what is your current credit score now?”

Despite being such a simple question, there really is no definite response to how a bankruptcy will alter your credit score. Under the Fair Credit Reporting Act (the primary law regarding your credit scores and accurate reporting thereof) a Chapter 7 bankruptcy will be on your credit report for 10 years, and a Chapter 13 bankruptcy will be on your credit report for 7 years. However, having a bankruptcy on your credit report, does not have near the effect on your credit score as other factors do.

To begin, each credit decisions turns on the individual lender’s qualifications, and creditors place more weight on a potential customer’s current income situation, and its stability, than anything else. Filing for bankruptcy will not affect your income situation, but it can solve your debt situation. When your debts are discharged in bankruptcy: (1) your debt-to-income ratio should drastically increase, (2) you will no longer be reported as late or in default on payments, (3) former judgments and repossessions or foreclosures can often times be removed after the bankruptcy is complete.

Would you rather lend to someone who is debt free, or someone who has never filed for bankruptcy but is behind on payments, thousands of dollars in debt, and facing repossession?

So, while filing for bankruptcy will hurt your credit if you have a high credit score, if your credit score is already low, filing bankruptcy is the best medicine to wipe out the debt and clear up negative marks on your credit once and for all. Then you can begin rebuilding. At Kain & Scott, we provide you with a personalized report on how a bankruptcy filing will effect your credit scores, so you can have a plan before anything gets officially filed with the court. If fixing your credit is a #1 concern, I recommend you give us a call and see if we can help.


If you would like to know more reach out to Minnesota’s largest and nicest bankruptcy law firm, by going now to or give me a call at 1-800-551-3292. You will be thankful you did.


Topics: Credit Score

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