The decision to file for bankruptcy should never be made lightly. However, it should be made based on accurate information and not on widespread myths and misconceptions.
One of the primary reasons that people hesitate to file for bankruptcy is the impact that it will have on their credit. Indeed, bankruptcy can have a significant effect on your credit score, even if you have had a good payment history and little negative information on your credit record.
There are some other popular myths about the impact of bankruptcy on a person’s credit that it’s important to dispel. For example, many people believe that all of the information related to your bankruptcy will remain on your credit report for a decade. In fact, while a Chapter 7 bankruptcy itself stays on the report for ten years, many items, such as third-party judgments and collection debts, drop off after seven years. Once these are gone, your credit score should start to go back up again.
Another myth is that you’ll never be able to get credit again (including credit cards) if you’ve had a bankruptcy. Actually, it’s important to work to rebuild your credit, and products like secured credit cards are an excellent way to do this. These are backed by a deposit you make to cover the amount that you charge to the card. There are also loans available that you can secure with a similar type of deposit.
While Chapter 13 bankruptcies can also remain on your credit report for a decade, the major credit reporting companies typically remove them after seven years. Therefore, if you’re able to qualify for this type of bankruptcy, that’s one of the advantages of it over Chapter 7.
Everyone’s situation is unique. Therefore, it’s wise to discuss your own with an experienced bankruptcy attorney. They can help you determine which you can qualify for and which one is best for you.