How can filing bankruptcy improve my credit?
If you are struggling with your debts, you may believe that there is nothing that can be done to stop the debt collectors from harassing you and continuing to ruin your credit. The truth is, if you are facing this type of situation, then filing for bankruptcy protection may be your most viable solution.
When you file for bankruptcy, all of your debt collectors must stop contacting you. This means no more harassing calls or threatening letters. The relief you feel from this will be enhanced when you realize that filing for bankruptcy protection also forces these debt collectors to stop reporting your debt as past due to the credit reporting agencies. Every month when these bill collectors report the account as delinquent, your credit score is affected. When this reporting stops, your credit score will begin to improve after a period of time.
These accounts will remain on your credit report for up to 7 years. The bankruptcy itself will be on your credit report for 10 years. However, since the discharged debts will not be reported as late payments or past due payments each month, your credit score will begin to increase after the bankruptcy is completed. Many people are even able to reestablish credit again within a few months after bankruptcy because of the improvement in their credit score. In fact, some lenders will even approve a mortgage within 2 years of a bankruptcy filing. Some creditors will also grant credit to purchase a new vehicle within 6 months of filing for a Chapter 7 bankruptcy.
Filing for bankruptcy is usually seen as something bad and as a last hope for financial recovery. In reality, it is a legal and smart way to handle a debt problem that cannot be managed in any other effective way. Things happen in life that can cause your debts to get out of control. Bankruptcy is a means to start over fresh and rebuild your credit and create a secure financial future for yourself.