For individuals and married couples who are struggling with overwhelming debt, often the most difficult part of filing bankruptcy is making the decision to file in the first place. As debtors contemplate bankruptcy, misinformation can lead them to think, "I'll have bad credit forever," or "I'll never be able to buy an automobile or a house again."

These concerns are just that – concerns – and if you find yourself worrying that filing for bankruptcy will be a financial death sentence, think again. While it's true that bankruptcy now stays on a person's credit for 10 years, it doesn't mean that they can't rebuild their credit well before the bankruptcy falls off their credit, or even buy a new car or a house a few years after the discharge!

Credit Scores Already Damaged

By the time most people file bankruptcy, they are 30, 60, or 90 days late or more on several accounts. Often, accounts have already been charged off. In other words, the damage is already done and their credit HAS been negatively affected by their numerous defaults.

For example, the unemployed debtor with multiple charge-offs, and 10 credit card accounts that have been sent to collections. The debtor's credit score is 500 and they owe $50,000 in credit cards, with the interest and penalties adding up every day. In this scenario, it would take the debtor years to dig out of their hole.

In contrast, if the same unemployed debtor filed a Chapter 7, they would be able to discharge all of the credit card debt and immediately start repairing their credit. Let's say the debtor gets a discharge and shortly thereafter finds a new job. After taking out a few small credit cards and paying all of their bills on time, within two to three years, the debtor's FICO score can reach 700.

It is possible to rebuild your credit score into the 700s within a few years of filing bankruptcy, you just need some sage advice from an experienced bankruptcy attorney on how to do it!