When you file for bankruptcy, your credit score will certainly be affected. However, many people exaggerate the effect that bankruptcy has on one’s credit score. If you are considering filing for bankruptcy, you should base your decision on accurate information—not myths perpetuated by uninformed individuals. In this article, we clear up some common myths about bankruptcy’s effect on your credit score. For additional information, please contact a Chicago bankruptcy attorney.
Myth #1: Bankruptcy information remains on your credit report for 10 years
This is only partially true. The record of a chapter 7 bankruptcy indeed lasts for 10 years. However, all other bankruptcy references only remain on your credit report for seven years.
Myth #2: You’ll have bad credit as long as the bankruptcy remains on your credit report
Although your credit score will certainly fall following bankruptcy, you can take steps to rebuild your credit. It’s not uncommon for someone to achieve a good credit score as soon as four or five years after bankruptcy.
Myth #3: All bankruptcy debts are erased from your credit report
Bankruptcy does help eliminate old debts. However, those accounts will remain on your credit report and affect your credit score for between seven and 10 years. In addition, federal student loans usually aren’t discharged in bankruptcy, which means you’ll have to pay them back even if you file for bankruptcy.
Myth #4: You can’t obtain a loan or credit card after bankruptcy
A credit card is one of the best ways to build credit after bankruptcy, and options are available for people who’ve filed for bankruptcy. For example, secured credit cards, which are credit cards that require an upfront deposit, are often an option for bankruptcy filers. In addition, loans are available to bankruptcy filers that are secured with collateral or a deposit—these also help bankruptcy filers rebuild their credit.
Myth #5: Bankruptcy permanently ruins your credit
As noted above, bankruptcy will definitely hurt your credit in the short term, but it will only remain on your credit report for a maximum of 10 years. If you make good financial decisions in the interim, you can have a good credit score by the time the bankruptcy falls off your credit report.
Contact Our Experienced Chicago Bankruptcy Attorneys
If you think that bankruptcy may be the right option for you, you need a Chicago bankruptcy attorney on your side. At Chicago Bankruptcy Clinic, our Chicago bankruptcy attorneys understand the financial and emotional sides of the bankruptcy process, so we’ll handle your case with compassion and efficiency. When you approach our experienced bankruptcy attorneys for assistance, you can rest assured that we’ll put our experience and skills to work in order to make your Chicago bankruptcy a success. Please contact us today to schedule a free consultation with one of our talented bankruptcy attorneys.