So, you think you might be headed for bankruptcy, and you are scared that your credit score will be ruined forever. Before you panic, not everything you have heard about bankruptcy is true. Here are a few myths about bankruptcy that could confuse you about how the process works.
Myth #1: All Bankruptcy Stays on Your Credit for 10 Years
This is a pretty popular myth, but it is not very accurate. Lines that say, “account included in bankruptcy”, third-party collections and Chapter 13 public record items only stay on your report for seven years. The only bankruptcy record that lasts over seven years are Chapter 7 public records.
Myth #2: Bankruptcy Means Your Credit Score Drops to a Zero
Let’s get the most important point out of the way first – your credit score will not drop to zero, that’s not even possible. Credit scores are designed to help you obtain new credit. Bankruptcy is a method to clean up any possible credit mistakes or mishaps that occurred in the past to get a solid foundation moving forward. You should not be concerned about your credit score when you file bankruptcy or even during bankruptcy. Getting a discharge in either Chapter 7 or 13 will improve your score. Both Chapters will also give you the opportunity to really examine your family budget and make adjustments where necessary. This will also help you when it comes time obtain new credit. It is possible that filing a Bankruptcy can reduce your credit score (this depends on where you are at when you file). However, any drop is temporary and the benefits will far outweigh any temporary reductions.
Myth #3: No More Loans for You
Some people have heard the rumor that you can’t get a loan or credit card once you’ve filed for bankruptcy. This just isn’t true. There are loan options out there for people who have filed bankruptcy. But when it comes to these loans, how much you earn and how much you wish to borrow are important. Borrowing more than you can afford will get you into trouble with debt.
Myth #4: Your Credit Will Be Ruined Forever
This myth is completely false. Credit scores are always changing, so no single issue is going to cause permanent damage. The recovery of your credit score depends on you and not your former bankruptcy. Developing good financial habits, maintaining a steady job, checking that the information listed by the credit bureaus is accurate, avoiding excessive borrowing and having a stable place to live will do wonders to improve your credit scores.
Remember, most bankruptcy filings will only stay on your credit history for seven or ten years at most. However, if you still have concerns, the best thing you can do is call a bankruptcy attorney. The experienced attorneys at The Sader Law Firm are here to help you get back on your feet.