by John G. Merna, Esq.
Halloween is about scary things we know are not real but enjoy being scared anyway. Bankruptcy is similarly scary because of the myths and urban legends about the process. Here are five “tricks” (myths) about bankruptcy that will help you better understand the powerful help bankruptcy can provide to a financially struggling soul.
Bankruptcy ruins your credit. WRONG! The effect on your credit score from filing a bankruptcy varies but is only a drop of a small number of points. Within a month, that small drop is reversed as your score rebound due to the halted negative reporting. Most people over look that their credit is already ruined and that is why they are considering bankruptcy. Bankruptcy is the gateway to recovering your credit score.
Bankruptcy makes your credit score drop to zero. WRONG! Not true as stated above, the reporting of the Chapter 7 or Chapter 13 filing has a small, short-term effect on your credit score. If your credit score is in the 500’s or lower then you have horrible credit and bankruptcy will help your score improve quickly. The reason the reporting of the bankruptcy has a small effect is because it is only reported in the “Public Records” section. The truth is that bankruptcy does not make your credit bad it is generally bad due to what you did prior and that is why you are considering bankruptcy. Don’t let people tell you the reverse.
Bankruptcy hurts your credit for 10 years. WRONG!The reporting of the bankruptcy can stay on your credit report for 10 years in the case of a Chapter 7 and seven years in the case of a Chapter 13. However, but that is not the same as how long it affects your credit. Your FICO or Beacon score is your credit not the fact that the public records section says you filed bankruptcy. Proof of this is that you can purchase a house with a government backed loan (VA, FHA, Fannie Mae) two to three years after bankruptcy. How is that possible if your credit is bad for 10 years. Beware not just of ghouls and goblins but of well-intended, misinformed friends that frighten you away from helping yourself due to their misbegotten beliefs.
I will have to give up my car and house if I file bankruptcy. WRONG! A good attorney can save both for you and get you a discharge of all your unsecured debt. Spent you time finding an experienced attorney not a cheap attorney. It will make all the difference in ways you won’t appreciate until later.
I will lose my security clearance if I file. WRONG! Bankruptcy is a federal right and recognized as a legal and valid solution when a clearance holder or clearance applicant fall on financial times. You debt is eliminated so you are not longer a security risk in that you might sell secrets to get money to pay your debt. This assumes no other lifestyle issues are in play.
Give Merna Law a call today and get rid of the financial demons that plague you this Halloween! 800-662-8813.