If you are struggling to pay off your debt, you may be thinking about filing for bankruptcy. However, you may be worried about how declaring bankruptcy will affect your credit score in the future. Although bankruptcy can impact your credit, that shouldn’t necessarily keep you from filing.
Here are some common misconceptions about how bankruptcy affects credit.
Bankruptcy Will Destroy Your Credit Forever
This is one of the most common myths about bankruptcy that prevents some people from filing. While your credit rating will take a hit initially after bankruptcy, it will not ruin it forever. Bankruptcy will stay on your credit report no longer than 10 years. You can start rebuilding your credit long before that and may see your score increase before you know it.
Bankruptcy Affects Everyone the Same, Regardless of Their Debts
Bankruptcy actually can actually affect people quite differently. The amount of debt you discharge and number of negative accounts you have on your credit report will impact your credit score after bankruptcy. For example, if you have a fairly low amount of debt that you discharged, you may have a higher credit score than someone with heavy amounts of debt.
You Can’t Qualify for Credit Cards or Loans After Bankruptcy
Some people also assume that they will never be eligible for credit cards or loans after they declare bankruptcy. Fortunately, this is not true. Although it will be more difficult to qualify for credit after bankruptcy, it certainly isn’t impossible. If you can’t get approved for traditional credit cards initially, consider applying for a secured credit card, which requires you to make a cash deposit. After you make timely payments for a while, you may qualify for a traditional credit card.
Bankruptcy Always Stay on Your Credit Report for 10 Years
Only Chapter 7 bankruptcy stays on your credit report for 10 years. If you file for Chapter 13 bankruptcy, it will just stay on your credit report for seven years.
Consulting a Bankruptcy Lawyer
If you are considering filing for bankruptcy, you may want to meet with an experienced bankruptcy lawyer. Bankruptcy can be a complex process, so you don’t want to go through it on your own. A lawyer can help you determine if you should file for Chapter 7 or Chapter 13 bankruptcy and give you sound legal advice.