Bankruptcy Will Ruin Your Credit for a Minimum of Ten Years?
The internet is a great source of information at our fingertips, but there's a downside as well. The downside is that anyone can hold him or herself out as an expert, write some reasonably convincing piece of speculation or propaganda, and it just might be spread all over the world as fact.
That sort of thing appears to have occurred last week, as MSNBC posted a "Motley Fool" article that picked up a post from a message board somewhere...and the next thing we knew, MSNBC appeared to be setting forth reasons you shouldn't file for bankruptcy.
In fact, though, those reasons were provided by an anonymous message board poster in 2003.
The first "reason" is "Bankruptcy will ruin your credit for a minimum of ten years."
"Minimum of ten years," of course, makes no sense, since ten years is the maximum period that a bankruptcy filing may appear on your credit report.
More significantly, however, the assumption that bankruptcy will "ruin your credit" for the duration of the time it appears on your credit report is completely unfounded. Many consumer bankruptcy attorneys report that those clients who use sound financial management and work on rebuilding credit after bankruptcy are able to obtain standard mortgage and car loans within 1-2 years post-bankruptcy.
Additionally, the poster completely overlooks the fact that if you're on the verge of bankruptcy, your credit report is already unfavorable, and that your FICO scores will be low due to issues such as high balances related to available credit and late payments.
It's true, as the poster suggests, that bankruptcy can stay on your credit report for up to ten years. It's true, as he further points out, that some credit applications ask whether you have ever filed for bankruptcy, taking the issue outside even that ten year window. What he overlooks, however (or intentionally avoids) is the fact that it's your most recent transactions that interest new creditors the most, and a year or two of current payments post-bankruptcy will go a long way toward repairing the damage. While there are a few creditors who won't work with anyone who has ever filed bankruptcy, the vast majority won't have much interest at all in a ten-year-old bankruptcy if your current accounts have been kept current and your debt to available credit ratio is low.
I filled BK in early 2004 in NC.
I recently pulled all 3 credit reports. I don't recall being told that the agencies could still list each credit account on your credit report even though Chap 7 was filed.
Every account shows and lists the
high balance before the last payment was made. They do show as closed, which is of no help.