As stated above, one of the most common reasons that people will look to avoid filing for bankruptcy protection is because they fear that their credit rating will be ruined forever. This is a myth that needs to be corrected, as filing for bankruptcy will generally do no more harm to a credit rating than that which already exists and can actually start the process of rebuilding that all-important score.
If someone is in a position where bankruptcy is a viable option for relief, it’s also likely that his or her credit rating is already in a state of serious disrepair. If someone has several delinquent accounts, defaults and ongoing collection efforts on his or her credit rating, those negative entries will remain on the report for seven years, and that seven-year period only starts to run after an account has either been paid or settled. The result is that if someone continues to run from creditors, those negative entries could remain on the report for longer than seven years.
However, when someone files for bankruptcy and the debts are ultimately discharged, that period of time that negative entries remains on the credit report begins to run. As long as no additional problems are encountered by the debtor after the case, he or she can look forward to a definitive date that these negative entries will no longer appear. In the meantime, some creditors will also provide opportunities for debtors to begin to rebuild their credit after a case is complete.