One of the biggest concerns that virtually all people have regarding bankruptcy, is how it will impact their financial future. Specifically, they want to know how long the bankruptcy filing will stay on their credit report.
Under the current rules (and there is no anticipation they will change in the foreseeable future), the answer to this question is 10 years. But there is more to the story that all prospective bankruptcy filers need to know.
The first thing to note is that bankruptcy is essentially a process designed to protect a debtor, and give them the opportunity to have a fresh financial start. Naturally, serving the rights of legitimate creditors and helping them potentially recover some of the money they are owed is part of the process (potentially because many chapter 7 bankruptcy filings are “no asset” filings, and as such creditors do not receive anything). However, the court does not have a legal or, frankly, a moral interest in permanently damaging or limiting a petitioner’s financial health and future prospects. Nor for that matter does society-as-a-whole. The chance at a fresh start really means a chance at a fresh start!
Restoring Credit Scores
Generally speaking, bankruptcy filers can expect to see their credit score increase by about 100 points within a year, simply due to the passage of time. And if a filer wisely applies for financial products like pre-paid credit cards during this time, and ensures that they pay all bills in full and on time, within two years they can easily bring their credit score up to a level where they qualify for a mortgage, a reasonable car loan, credit cards, and so on.
In fact, many people who file for bankruptcy end up with a higher credit score in the long run, because they develop excellent habits that include living with their means, and learning how to properly use and leverage debt.
Impact on Employment
Many people are also concerned with how a bankruptcy will impact their career prospects. We have written in detail about this topic here. Suffice it to say, for most people the impact is far less damaging than they fear or dread.
Impact on Renting an Apartment
We have also focused on another aspect that is of a significant concern: how a bankruptcy will impact one’s ability to rent an apartment. The article is here. Once again, the adverse impact is far lower than most people fear or have been led to believe, and the costs of potentially having to make some housing adjustments are usually far offset by the gains and benefits afforded by bankruptcy protection — not the least of which includes stopping all wage garnishment and collection action, and putting an immediate end to aggressive collections actions and tactics.
Filing for bankruptcy is a major, life-changing decision and should NOT be taken lightly. However, the belief that having a bankruptcy on a credit score is “a financial punishment that keeps on punishing” is totally unwarranted.
If you are deeply concerned about your debt situation and want to get the facts on filing for bankruptcy — so that you can make an informed decision that is best for your current and long-term financial picture — then contact the Law Office of Charles H. Huber today for a confidential consultation.