Does Filing Bankruptcy Really Kill Your Credit For 10 Years?

30 May Does Filing Bankruptcy Really Kill Your Credit For 10 Years?

A common misconception about bankruptcy is that it completely destroys your credit for 10 years. This is simply not true.

Here, two completely different concepts are being confused with each other. The fact that bankruptcy is reported on your credit report for 10 years (7 years for Chapter 13) is getting mixed up with the effect that reporting will have on your credit. Just because something is reported on your credit report does NOT necessarily mean it will have a negative effect on your credit standing. In fact, many of my clients’ credit scores actually improve after they file!

Here’s why. By the time you need to make an appointment to see a bankruptcy attorney, your credit is usually pretty trashed, messed up and maxed out. This being the case, you have no credit for bankruptcy to hurt. As I usually tell clients, “You can’t wet a river.”

Even if you have excellent credit when you file, as some of my clients do, the longer that passes since the filing date, the less important the filing itself is to potential lenders. Of far more importance is “what have you done for me lately”–that is, what your recentpost-bankruptcy income and credit shows about your ability to pay.

This is why, as I mentioned in Myth #5, in my experience, if you have not re-established good credit within two to four years after you receive your bankruptcy discharge, most likely it has nothing to do with the fact that you filed bankruptcy…and it certainly has absolutely nothing to do with the fact that your credit history still shows an old bankruptcy. Instead, it is likely to do with your experiences afteryou file for bankruptcy–missed payments on new debt or a post-bankruptcy payment default are the two biggest killers of post-bankruptcy credit.

Image credit:Express Monorail

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Brett Weiss, a senior partner at Chung & Press, LLC, represents people and businesses in all phases of bankruptcy. He has experience in complex individual Chapter 7, Chapter 11 and Chapter 13 bankruptcy cases, and in Chapter 11 small business restructuring and reorganization. Mr. Weiss lectures nationally on bankruptcy issues. He has testified before the Federal Bankruptcy Rules Committee, the Consumer Financial Protection Bureau, and has twice testified before Congress on bankruptcy and credit issues. Brett Weiss is the co-author of Chapter 11 for Individual Debtors, and has written Not Dead Yet: Bankruptcy After BAPCPA, for the Maryland Bar Journal, as well as hundreds of blogs for the Bankruptcy Law Network. With his law partner, he recorded a 13-hour basic bankruptcy training series, and leads intensive three-day Chapter 11 training boot camps. Mr. Weiss has received international media attention in connection with his work. He was interviewed by Barbara Walters on The View, has appeared on the Today Show, Good Morning America, ABC News with Peter Jennings, the Montel Williams Show, National Public Radio, AARP-TV, the BBC World Service, German state television, and numerous local radio and television programs, and been quoted in Money magazine, The Washington Post and The Baltimore Sun, among others. Brett Weiss is the Maryland State Chair for the National Association of Consumer Bankruptcy Attorneys, a founding member of the Bankruptcy Law Network, on the board of the Maryland State Bar Consumer Bankruptcy Council, and a member of the American Bankruptcy Institute, the Bankruptcy Bar Association of Maryland, and the Civil Justice Network. He has been recognized as a “Super Lawyer” every year since 2007 for Maryland and the District of Columbia, and in 2011 received the Distinguished Service Award from the National Association of Consumer Bankruptcy Attorneys for his work on behalf of consumers across the country. Mr. Weiss is admitted to practice before Maryland and District of Columbia federal and state courts, the United States Courts of Appeals for the DC, Fourth and Eighth Circuits, The United States Tax Court, and the Supreme Court of the United States, and has been practicing law since 1983.
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