As you ponder the pros and cons of bankruptcy, you may find yourself facing many questions.
One of the most common is in regard to what will happen to your credit rating if you move forward with the bankruptcy process.
In other words, you have some concerns about your credit taking a big hit.
While there is no denying the fact that a bankruptcy will have a negative impact on your credit, you have to compare this drawback to the many benefits you will receive.
Generally speaking, this all comes down to one thing: the length of time a bankruptcy will stay on your credit report. This depends largely on the type of bankruptcy you file, with this information among the most important:
- A Chapter 13 bankruptcy will stay on your credit report for a period of seven years
- A Chapter 7 bankruptcy will stay on your credit report for a period of 10 years
Discharged debts will also remain on your credit report.
Is this a big deal?
In an overall sense, filing for bankruptcy is a big deal with respect to the impact on your credit rating. This will make it more difficult to qualify for a loan in the future, such as if you want to purchase a home or car.
However, as the items on your report related to the bankruptcy grow older, the impact begins to die off.
With this in mind, you can begin to rebuild your credit score even with a bankruptcy on your report. It will take some time and dedication to make progress, but the potential is there. You should do things such as:
- Check your credit score regularly
- Use a secured credit card
- Pay all your bills on time
- Don't apply for too many accounts at once
In a perfect world, you would be able to go through bankruptcy without it having an impact on your credit rating. Unfortunately, this is not the way things work.
Despite the negative effect on your credit, there are benefits that make bankruptcy the right choice for many people.