Myths to ignore about bankruptcy
Michigan residents and others who file for bankruptcy may see their credit score drop by as many as 200 points. However, a lack of negative information on a credit report prior to the bankruptcy has little impact on how much damage it will do to a specific individual. Typically, the fact that a person has filed and how long ago it occurred play the biggest roles in impacting a person’s credit.
It is important to know that only a Chapter 7 bankruptcy stays on a credit report for 10 years. All other information falls off after seven years, and this includes the fact that a person filed for Chapter 13 bankruptcy. However, the impact of a bankruptcy tends to be less significant as time passes, and credit scores may improve significantly within four or five years. Individuals can obtain new credit to help repair their credit immediately after a bankruptcy case is over.
This can be done by applying for a secured credit card or a credit builder loan. A person may also benefit from a lower debt-to-income ratio after debts have been discharged. However, individuals should know that not all debts can be erased in bankruptcy. Federal student loans are a common example of a debt that generally doesn’t go away in either Chapter 7 or 13 proceedings.
People who are struggling with credit card debt, medical debt or any other debts may be able to find relief through bankruptcy. Whether an individual chooses to file for Chapter 7 or Chapter 13 bankruptcy, it may be possible to have unsecured debts discharged and secured debts reorganized. It may also be possible to put an end to creditor contact as well as postpone a foreclosure or repossession. That might provide enough leverage to renegotiate loan terms with a lender.