Bankruptcy credit score myths dispelled
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One of the top concerns of consumers preparing to file bankruptcy is the impact to their credit score. Although bankruptcy is usually called the “last resort” for those deep in debt, it shouldn't be seen as rock bottom, but a relaunching point to a much better financial future. That's true for every aspect of your financial life – including your credit score – so long as you make the most of that fresh start. Here are five myths about your credit score after bankruptcy so you can see the true benefits of this debt relief option.
#1 You can't get new credit for 7-10 years after bankruptcy
This is one of the biggest myths about the impact of bankruptcy on your credit score. In fact, for most people, they can start working on new credit within just a few months of obtaining a Chapter 7 discharge. If you're living paycheck to paycheck, unable to pay your bills, paying late or not at all, your credit score is dropping every month. Filing Chapter 7 ends this cycle and gives you a chance to reboot.
#2 Your credit will be permanently ruined
No, your credit will not be ruined permanently. The bankruptcy listing itself will stay on your credit report for 10 years, but the accounts associated with the bankruptcy will fall off in seven years or less (depending on the date you last made a payment). Once you have your discharge in hand – three to four months after you file a Chapter 7 – you can start to conservatively rebuild your credit and you'll be amazed at how much higher your score can be within just one year from the date you first file.
#3 You won't be able to buy a house or car after bankruptcy
Of course, prospective mortgage and auto lenders will see the bankruptcy on your credit report. But if, since your filing, you've been diligent about rebuilding your credit responsibly, you should be able to find a lender that will work with you. You may have to offer a little more of a down payment or pay a slightly higher interest rate, but you can get a loan. Then, when your credit score improves even more, you can refinance to get an even better deal.
#4 Your credit score will be better off without bankruptcy
If your financial situation is so dire that you are considering bankruptcy, the reality is that your credit score is probably dropping every month. And it will continue to do so until your bad debts either age out and fall off your credit report (which takes seven years from the date of the last payment) or you start making enough money to catch up on your bills and pay off past-due balances. But once you're behind on bills, it's tough to get caught up without help. Bankruptcy can be a faster way to a higher score.
#5 You can lose a job or bank account because of bankruptcy
Some jobs require a positive credit score or security clearance and you may worry that a bankruptcy can cost you either or both. Instead, if your job or clearance is at risk because of your low credit score, a bankruptcy can protect you. A bankruptcy is not usually seen as a negative to employers and clearance evaluators - compared to excessive debt, past-due debt, garnishments, etc. With bankruptcy you get a clean slate on your debt which means you are less likely to make poor choices because of bills.
To find out more about the benefits of North Carolina bankruptcy, contact the Law Offices of John T. Orcutt today. Call +1-919-646-2654 for a free consultation in Raleigh, Greensboro, Wilson, Fayetteville, Garner or Durham.