Which is better for my score? please assist

[Anonymous]

Hello,

I have undergone a divorce in the past, have been through financial problems, and have a credit score that ranges between 500-550. It does not seem to move although I have new credit which I am keeping a low balance on.

I have a bankruptcy, two judgements, and numerous collections, charge offs, etc with existing balances. Bankruptcy falls off my credit report May next year but the remainder  judgements and derogatory/default accounts are on for awhile. I did pay the judgements off. I show a first mortgage which foreclosed and zero balance and second mortgage balance with a balance.

My question is would filing Chapter 7 bankruptcy help or hurt me by the time May next year comes around (ie. would the clearing of my existing bankruptcy help out alot or  or will the other items keep my score down.) 

Thanks in advance for the assistance.

[llecs]

For clarity, you wanted to know if filing for BK next summer would help or hurt? If I read right, it'll hurt more than now. You'd be replacing an old BK with a new one, plus you'd still have the pre-BK derogs showing. If I read wrong and you were asking how your score will respond with the loss of the BK, then there's a chance for positive movement. The baddies will still hurt, but you'll be in a much better position for score improvement.

[Anonymous]

Thank you for your reply.

I would be able to file BK now since 7 (or 8 years, whichever is mandatory) has passed. Wouldn't the balances on the pre-BK derogs zero out and instead of showing collections or charge off, it would show discharged. How about the satisfied judgements? Do they go away with a bankruptcy?

[pizzadude]

I believe that the pre~BK judgements would not be affected by filing BK.   The BK would just negate your liability for the debt but it would not erase it.

[llecs]

I took a lap around the BK board to see how things are supposed to report...

Pre-BK judgments will remain post-BK, except that the balance will go to zero and there might be a IIB mention. Per FICO scoring, it won't help any.

Pre-BK collections will remain post-BK. Like with judgments, the balance will go to zero and there might be a IIB mention. Per FICO scoring, it doesn't matter any.

With regards to judgments and collections, it doesn't matter if the balance is $0 or $10k, they are scored the same so that's why zeroing out the balance won't help.

Pre-BK charge-offs will remain, as will the lates. Filing BK will not result in a deletion. Generally, reporting a $0 balance on a CO won't help your FICO any, unless that $0 balance improved your CC utilization.

The only thing that will get deleted is any account added post-BK, assuming it was included in the BK (e.g. like a sleeping CA).

In short, expect a further drop in FICO.

IMO, ignore FICO. In fact, ignore credit. It's unimportant. YOu are in a situation where credit is the last thing you'd ever want to think about. I suggest cutting up any cards you have now and go off the credit grid for several years to get back on your feet.

I don't know your situation, and won't make any ssumptions without being told, but it sounds like you are eager to file. Do everything in your power to avoid it and to pay off debts. Get a second job, a third, and fourth, or whatever is needed to increase income. Conversely, decrease expenses. Downgrade vehicles, home, services like cable, phone, etc.  And sell stuff too. You'd be surprise how much people are willing to pay for old items around the home that you'll never need or use.

The purpose of BK is to spare assets. Purge them and BK would be pointless. It'll save you money and grief and you'll recover your scores a lot faster (if FICO is important). Another reason to file is to protect your income from garnishments post-judgment. But you've already been sued. I'd take steps after self-reorganization to pay down or pay off the companies that pose the greatest threat of suing you. In fact, some of the debt might be outside your state's statute of limitations meaning they can't sue anyway. They can't touch you. Take these steps and you'll recover faster sooner.