One myth associated with bankruptcy is that filing for bankruptcy will damage your credit. Although a bankruptcy may be listed on your credit for several years, many people who had bad credit before filing find that their credit is improved much easier after filing for bankruptcy.
Why Is This?
The fastest way to damage your credit is by missing a payment. Missing or repeatedly late payments put your account status in delinquency. Delinquent accounts can quickly chip away at your credit score with each passing month. In order to qualify for bankruptcy, you must be able to demonstrate financial need for help repaying your debts. If your accounts are not delinquent, you may not qualify for bankruptcy. Therefore, in order to obtain help through bankruptcy your accounts are considered delinquent, which means your credit has already been damaged.
Many people find that once their bankruptcy case is completed, their credit is able to be improved right away. Bankruptcy provides a clean slate by removing the delinquent status from your accounts. Once the delinquent status is removed, your credit begins to improve. With a clean slate, you are provided an opportunity to begin repairing your credit by obtaining smaller loans and keeping up with timely payments.
Anyone filing for bankruptcy should consider their motivation for doing so. If you are filing for bankruptcy strictly to attempt to obtain a clean slate for credit purposes, you may not benefit as you expect. Bankruptcy is a tool to help those experiencing significant financial hardships and anyone considering filing must pass a financial means test. Needing to improve your credit and needing financial help with repaying your debts are two separate issues.