Bad Credit Resource Center

A bankruptcy will affect your credit score more than just about anything.  To make matters worse, it’ll affect it for many years.  In the first few years after a bankruptcy, you may not be able to obtain loans at all. 

In short, a bankruptcy is a legal proceeding that either forgives you of your debts or allows you to pay off just a small fraction of your debt.  It will nearly ruin your credit rating at first, but it will also allow you to dig out from overwhelming debt and reestablish a good credit rating again after years.  A bankruptcy will usually stay on your credit report for ten years. 

If you’re heavily in debt and have no way of repaying your obligations, a bankruptcy can help you by stopping collection agencies from contacting you and other problems.  Also, if you have been very negligent in paying your large debts, your credit rating has already likely suffered greatly. 

While a bankruptcy will depress your credit even further, at least it will give you the chance to repair it by giving you a “clean slate” free from large debts.  However, don’t choose bankruptcy as an easy way out. Bankruptcy has serious credit consequences - it’s not just a “ding” on your credit report - it’s a giant red flag to lenders. 

After a bankruptcy, you will be ineligible for credit cards, many types of credit and will even be told what you can and cannot buy.  The bankruptcy process can also be very stressful and mentally draining.

Bankruptcy should only be chosen as a last option if you really require your debts to be forgiven because you have no way of repaying them.
 

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