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Learn the facts about filing for Chapter 7

If you are facing down a mountain of debt, chances are good that you already are feeling trapped under the weight of your responsibilities. Bankruptcy might be starting to look like a viable option.

Filing for bankruptcy is the "nuclear option" of indebtedness, but it definitely is a useful one. It will negatively impact your credit score, potentially by decreasing it more than 200 points. Below are some misconceptions surrounding filing for Chapter 7 bankruptcy protection.

-- Bankruptcy information remains on filers' credit reports for a decade with no exceptions.

While it's true that public records of Chapter 7 bankruptcies remain for 10 years, other references to bankruptcy proceedings on credit reports stay only seven years, like notations "Account included in bankruptcy,"public records of Chapter 13 and tax liens and judgments that were discharged in a bankruptcy.

-- Your credit score will stay bottomed out as long as your bankruptcy stays on your credit report.

It's actually surprising how quickly you can turn around your finances if you commit to fiscal management strategies following a Chapter 7 bankruptcy. Within four or five years, you could have a score of over 700 as long as you make your payments on time for new and remaining debts and keep low balances on new accounts.

There are other factors that can influence a filer's bankruptcy status that they should consider before taking action. Some debts, like student loans and child support arrearages, are not extinguished in a bankruptcy proceeding of any type. To make sure that you choose the option that best fits your situation, it's advisable to consult a legal professional.

Source: credit.com, "5 Bankruptcy Myths Debunked," Barry Paperno, accessed July 01, 2016

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