Chapter 7 Bankruptcy And The Myth Of Terrible Credit

29 Jun Chapter 7 Bankruptcy And The Myth Of Terrible Credit

Your Credit Score can be an important asset. It determines your ability to get credit, and the cost. It could be a factor in your getting a job, renting an apartment, and purchasing a house or a car. When you file a Chapter 7 bankruptcy, your credit score will be affected. In some cases, however, its affect on your credit score may be minimal, and may be temporary.

If you are way behind on paying your bills, and have been for some time, your credit score is already bad. When you file bankruptcy, and receive a bankruptcy discharge, your credit score might actually go up. This happens because all of the creditors listed on your credit report indicate your current balance, your available credit, your past due balance and your payment history. When you get your bankruptcy discharge, each listing on your credit report will simply say included in bankruptcy or discharged in bankruptcy. The balance due and past due balances will be listed as zero. While the bankruptcy filing is a negative on your credit score, the omission of balances due and past due balances will have a positive effect on your score.

Even if your credit score decreases when you file your bankruptcy, it will not stay low forever. Most people who file Chapter 7 bankruptcy find that within two years of filing, their credit score improves to a good or excellent level.

The myth that you cannot get credit for 10 years after filing bankruptcy is just that – a myth. The advertisements you see or hear urging you to enter into debt settlement to avoid filing bankruptcy are designed to give the impression that debt settlement would not harm your credit score like bankruptcy would. The truth is often the opposite. Working with debt settlement companies usually hurts your credit because you get further behind in payments, have larger past-due balances, and settlement itself is a negative on your credit score. Also, many people working with debt settlement companies find that they get sued by creditors anyway and then have to turn to bankruptcy after they have spent thousands of dollars trying to avoid filing bankruptcy.

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Peter Orville is a bankruptcy lawyer in Binghamton, located in the Southern Tier of New York. He is a member and New York co-chair of the National Association of Consumer Bankruptcy Attorneys.
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