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5 Myths About Bankruptcy And Your Credit History

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  • Jill
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  • December 17, 2020

5 Myths About Bankruptcy And Your Credit History

When you realize that bankruptcy is your only chance for getting back on track financially, it can seem like your world has ended. You might be inclined to find out how badly filing for bankruptcy will impact your credit score. As well as looking into how quickly you can recover. Fortunately, it might not be the catastrophe you’re envisioning for yourself. Let’s debunk a couple of myths to help you see some light at the end of the tunnel.

Myths About How Bankruptcy Affects Your Credit Score

When your finances become overwhelming to the point that you can’t meet your regular day-to-day expenses, it’s time to admit defeat. Unfortunately, this can happen to anyone at any time for several innocent reasons. In fact, people often file for bankruptcy due to sudden severe illness, unexpected costly home repairs, or even a car that dies, leaving you with no transportation to get to work.

These expenses take priority over everything else, forcing you to delay important payments and default on certain bills, ultimately leading to the current bankruptcy situation. First and foremost is to realize you didn’t fail: life happened. 

The second thing to realize is that after you file for bankruptcy, there are people who can help. These people are known as credit counselors. In short, credit counselors aim to help people develop a reasonable budget so that they can begin the long, challenging process of rebuilding their finances.

The third thing to understand is that a lot of what you hear about bankruptcy is not entirely fact. It’s essential to separate the myths from reality. Some myths include:

Myth #1: Bankruptcy as the answer to eliminate all debt

When you file, it’s imperative to find a trustworthy, reputable attorney such as Bartifay Law Offices. A knowledgeable bankruptcy attorney can advise you which debts you can discharge and which are unforgivable. Usually, credit cards, personal loans, medical bills can be discharged with a bankruptcy filing.

Myth #2: Your credit report  will end up looking bad

Bankruptcy is a red flag, but it is not a black mark forever. When you apply for credit, a typical creditor will take into consideration some factors more stringently than others, even if there is a situation like bankruptcy.  For some credit assessors, this means looking at the debt released and the total negative accounts on the records. In using this concept, a report will look better to this assessor if the debt is relatively low and spread over merely a small number of accounts resulting in a better score.

Myth #3: Accounts listed in bankruptcy will be automatically removed from the credit report once filed

That’s not even a little bit true. These accounts will remain on the report for up to ten years post-bankruptcy, with the impact decreasing as time passes.

Myth #4: The credit score you’re assigned will stay with you as long as the bankruptcy shows on the report

You should, of course, expect to have a diminished credit score immediately following your filing. But after that, it’s a matter of being proactive and taking time and effort to do everything in your power to improve the scores in the wake of the bankruptcy. Doing so can result in a substantial rise, depending on your actions, after merely a few years. The need to make any payment arrangement payments on time every time, obtain a secured card, begin to rebuild on your credit, and develop a reasonable budget that you stick to, is a must.

Myth #5: The bankruptcy smudge stays on credit for ten years, with no exceptions

Chapter 7 filings will show on the public record aspect of the report and will remain for ten years. The charges discharged through your filing have a notation referencing the bankruptcy, and these remain for seven years.

Final Thought

Don’t look at bankruptcy as a flaw in your character. Filing is your attempt to recover and get things back on track. Bartifay Law Offices can help you take control of the situation and you will be credit-worthy again before you know it.

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