Filing For Bankruptcy?
As bad as it is, bankruptcy is not the end of the world. You do want to minimize the impact on your credit score and accelerate the recovery. Here are four myths on bankruptcy and credit.
Myth 1: Bankruptcy information stays on your credit report for 10 years, without exception.
There is actually another layer to this. Bankruptcy appears on a credit report in a couple of ways. First, a Chapter 7 bankruptcy shows up on the “Public Record” section of your credit report. This stays on for 10 years. Second, there are the Credit Accounts that were discharged through bankruptcy—the bankruptcy is referenced or noted on the account. These accounts stay on the credit report for 7 years, just like all other accounts.
Myth 2: Any bankruptcy looks bad on your credit report.
Yes, any bankruptcy looks bad, but some can look worse. When applying for credit, creditors commonly weigh some factors more heavily than others, even in a bankruptcy situation. These factors can include the amount of debt discharged and the total number of negative accounts on the credit report. For instance, a credit report with relatively low debt total spread over only a few accounts may look a little better—and result in a better credit score—than a history with many more accounts and more debt.
Myth 3: Any accounts associated with bankruptcy will be removed from your credit report once the bankruptcy is filed.
Sorry, but not even a little true. Those account will continue to remain on your credit report for the entire 7 to 10 post-bankruptcy years (though the negative impact lessens over time)
Myth 4: You will have a low credit score the whole time that the bankruptcy remains on your credit report.
Obviously, you should not expect a high score immediately after filing for bankruptcy. But, there are actions you can take that will help improve your credit scores in the aftermath. With planning, you may even see your score rise significantly after just a few years, doing things like: making all your payments are on time or maintaining a secured credit card.
A lot of people feel that bankruptcy is an admission of failure or a character flaw. It is actually a financial remedy for financial disaster, no matter what the reason for the devastation. Remedies are used to cure. Think of this bankruptcy like that, a period of recovery, a time to get better. Don’t beat yourself up. But do take care and take the actions to get your credit in order. You will have credit worthiness in no time.