Filing for bankruptcy has its pros and cons, but many people believe that filing for bankruptcy will ruin their credit forever. While bankruptcy can affect a person's credit, it will not ruin their credit forever. In fact, if you handle your situation the right way, you might have better credit shortly after filing for bankruptcy than you had prior to filing. Here are three things you should understand about the effects bankruptcy can have on your credit.
It will hit your credit at first
Shortly after you file the necessary bankruptcy documents, the court will notify the major credit bureaus. This will result in a derogatory mark on your credit report, and it will cause your credit score to drop. It will drop more if your credit is currently good but will drop less if you already have a low credit score.
It will eventually drop off your credit file
While there is nothing you can do about this mark being placed on your credit report, the good news is that it will not stay there forever. It will eventually drop from your report just like every other posting you have on your report. If you used chapter 7, it will drop off 10 years from the date the court discharges your case. If you used chapter 13, it will drop off 7 years from the date of discharge, which will not occur until after you complete your repayment plan.
It offers an opportunity to start over
While you can see that filing for bankruptcy will negatively affect your credit, the good news is that filing for bankruptcy offers a chance to start over. The negative mark on your credit report will not cause you to have poor credit forever. Even while the mark is still present on your credit report, you can rebuild your credit quickly after bankruptcy, which means you will be able to get lines of credit shortly after filing.
To do this, you should dispute any problems you see on your report that are not accurate. You should also avoid racking up new debt. Another option is to apply for a credit card to use. When using it, you should pay it off in full at the end of each cycle. Finally, applying for a loan could also boost your credit by offering a way to rebuild positive repayment history.
If you are ready to seek help for your debt problems, you should begin the process by contacting a bankruptcy attorney in your area.