If your main concern about filing bankruptcy is the negative effects it will have on your credit, you may want to research this topic a little before making the decision not to file. While it is true that your bankruptcy filing will be placed on your credit report, it may not cause as much damage to your credit score as you think. Here are three important things to understand about the effects of bankruptcy on your credit.
It will appear for 7 to 10 years
The two main types of bankruptcy are Chapter 7 and Chapter 13. When you file for Chapter 7, the filing will stay on your credit report for 10 years from your filing date. When you file for Chapter 13, it will remain there for 7 years. This is not something you can avoid, and there really is no way to change these time frames.
It may not worsen already-bad credit
If you need bankruptcy because you cannot pay your bills, your credit may already be less than stellar right now. If you have any missed payments on your credit report and if you owe a lot of money to your creditors, your credit score is probably fairly poor already. While bankruptcy might cause your score to worsen a little, there is a chance it may not really affect it much at all.
You will have an easier time rebuilding your credit
It's also important to realize that bankruptcy will help you get rid of debts, and this will help you have more money in your normal budget. With extra money, you may find that paying your bills is easy to do, and this is all because you received a fresh start through bankruptcy. Once you file for bankruptcy, you will have the opportunity to begin rebuilding your credit almost instantly.
You can do this by applying for secured credit cards or by taking out a car loan. If you pay these bills on time each month and avoid racking up credit card debt that you cannot pay off when the statements come, your credit will slowly begin increasing. Within just a couple years, your credit may be good enough to qualify for a mortgage loan and regular credit cards.
Filing for bankruptcy might actually open the possibility to improve your credit score faster than you could have without filing. For more information about filing for bankruptcy, talk to an attorney in your area.
