If you go through Sequestration (Bankruptcy) your credit rating will become worse. Unfortunately this is unavoidable.
The fact that you are bankrupt will be recorded on your credit file and will show up if anyone carries out a credit check against you. This record will remain on your credit file for 6 years.
That means that your credit rating with continue to be negatively affected after you are discharged normally after 12 months. After six years have passed the record of your Bankruptcy will be automatically taken off your credit file.
How long will your credit rating be affected?
Your Sequestration will remain recorded on your credit file for 6 years from the date it starts. During this time, it will show up if anyone carries out a credit check against you. This is very likely to stop them from lending you more money.
After six years have passed, the record of your Sequestration will be taken off your credit file and your credit rating will start to improve again.
It is important to understand that it is possible for any of your creditors to record a formal default notice against you after the date that your Sequesration started. In the same way as the record of your Sequestration, default notices will also remain on your credit file for 6 years. It is therefore possible for a default notice to remain on your file after the record of your Sequestration has been taken off thus extending the time that your credit rating is affected.
The way to overcome this is to get a copy of your credit file after your Sequestration finishes. If you find any default notices have been added after the start date of your Sequestration then you should contact the associated creditor and request that the date of the default be changed to the date your Sequestration started.
Will my credit rating be affected anyway?
If you are struggling with debt and you are no longer able to pay your creditors, your credit rating will be affected whether you enter into Sequestration or not.
As such, if you are in a position where you are unable to afford to pay your creditors and cannot help but miss your normal payments to them, worrying about your credit rating should not be the primary factor to consider when deciding whether to carry out Sequestration.
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