Going through the bankruptcy process is certainly a difficult experience, and it does have repercussions that can last for a relatively long time. Filing for bankruptcy is considered a last resort when facing a complete financial breakdown, but for the hundreds of thousands of Americans who file each year, it’s often their only viable option. For those who have filed, and those who are considering filing, it’s important to separate the truth about bankruptcy from the myths. Here are some common myths you may have heard about filing for bankruptcy.
Myth #1: Bankruptcy will ruin your credit forever.
It will take some time for your credit to recover from bankruptcy, but you can still build healthy credit. Student loans can’t be included in bankruptcy, and as you continue to pay off student loans, your credit score will benefit. If you are still paying a car loan, those payments will also help your credit. In general, record of the bankruptcy itself will stay on your credit report for ten years. However, many of the delinquent accounts themselves will drop off your report after seven years. With careful credit use after bankruptcy, you can expect your credit to get a boost at the seven-year mark.
Myth #2: If you had good credit before your bankruptcy, your credit report will have less damage than if you had poor credit.
There are a lot of elements that go into your credit score, and it’s important to accept that the bankruptcy itself, and the accounts it affected, will have the biggest negative impact on your credit. How much your credit score will drop is nearly impossible to predict until the filing has hit the credit bureaus.
Myth #3: You won’t be able to get a credit card after bankruptcy.
You can get credit cards after bankruptcy. You may have heard that the only type of card you can get is one with a secured line of credit. This isn’t necessarily true. You may very well qualify for a card, with a decent credit limit and interest rate, that doesn’t require a deposit. It’s important to note that you will start to receive unsolicited credit card offers, but read the fine print. There are institutions out there that will try to take advantage of your situation. Be patient, and make sure the terms of a card are reasonable. A credit card or two, with diligent payments, will be a benefit to your credit score.
Myth #4: You will have difficulty buying a car after bankruptcy.
Cars are amazingly easy to buy, even after bankruptcy. However, many finance companies will offer you ridiculously high interest rates. Be persistent. Inquire of all your financial resources, from the dealer to your personal bank or credit union and ask them to give you the best possible rate.
Myth #5 You can’t buy a house until a bankruptcy leaves your credit report.
In general, you may qualify for some conventional home loans four years after your Chapter 7 bankruptcy is discharged. If you filed Chapter 13, and it has been discharged, you may not have to wait the four years. Also, you may qualify for an FHA or VA loan two years after your Chapter 7 bankruptcy is discharged. With a good credit history after your bankruptcy, you should be able to find a loan that works for you.
A word about renting. A common, and frightening, myth about bankruptcy is that you will not be able to rent a desirable home for you and your family. Landlords and rental corporations look at a variety of factors when deciding if they will approve a rental application. Approval depends on everything from how much you make to whether you have a criminal history. Apply for the place you want, and work with the landlord if the bankruptcy is an issue.
Although filing for bankruptcy is far from ideal, sometimes it is the only way to get out from under crushing debt. In fact, for many, filing for bankruptcy is a new beginning. It’s important that you educate yourself as much as possible before you decide to file as well as after you file. Some of what people tell you will be very true, but you will also hear lots of half-truths and myths. Fortunately, we live it an information age, and there’s plenty of reliable information on bankruptcy readily available. Find out the facts, and look forward to a secure financial future.