Filing bankruptcy of any kind is often a hard pill to swallow for many. Generally, by the time a person has made up their mind to file, the debt battle has been fought for many hard years. Whether due to unforeseen circumstances, bad choices, or some catastrophic life event, admitting financial defeat and starting over can take a toll. However, we want you to know there is a light at the end of the tunnel, so we are here to debunk a few myths.
First, bankruptcy does not ruin your credit forever. It is very possible, and actually easier than you think, to rebuild credit and have an excellent score. Yes, it will take time and commitment on your part. A Chapter 7 bankruptcy will remain on your credit report for up to 10 years from the date of discharge. While this does have a major score effect, it does not prevent a debtor from opening new accounts. One may purchase a new vehicle, or open a secured credit card account the very next day after discharge. Any new debt that regularly reports to the credit bureaus, and that you pay on time, will help rebuild.
Second, filing bankruptcy does not mean that you lose everything. When you file Chapter 7 bankruptcy and there are debts you would like to assume, such as a mortgage or car note, you will be given the opportunity to sign what is known as a Reaffirmation Agreement. This is an agreement between a debtor and creditor stating that particular debt will continue to be paid, and the debtor will continue to be liable for it. Essentially, that debt will not be considered a part of the bankruptcy and the debtor will keep the collateral as long as timely payments are made. One stipulation to these agreements is that payments must be current on the account at the time of execution. Debtors also need to be positive that ongoing payments can be afforded. Once a Reaffirmation Agreement is executed, with the exception of a short period of time to rescind, there will be no protection provided by the bankruptcy for that account, no will there be any discharge of a remaining balance should the collateral be repossessed or foreclosed in the future.
At the end of the day, the most important thing we want you to know is that bankruptcy is not a finish line. It is a starting point. An experienced bankruptcy attorney can help you navigate the murky waters of debt, and set you on a path to new financial freedom. If you have been on the fence about filing, consult with an attorney to ease your mind and clear up any questions you may have.
