When you consider on all the benefits of bankruptcy, then weight them against its’ downsides, bankruptcy often makes much more sense than the average person might think. Take for example the issue of “bankruptcy staying on your credit as a scarlet letter for a period of 7-10 years.” In response to the question about whether this is true, the answer is a resounding “Yes and No!” Here is the brief part about this being true. The truth of the matter is that the bankruptcy will report on credit for a period of 7-10 years. However, the no portion of this answer is much more applicable for people and their credit than the yes part of the answer. The truth is, although bankruptcy stays on credit for 7-10 years, the impact it holds over your credit score, and the degree to which it affects a person’s ability to obtain new credit is restricted mainly to a 2 year period.
The reason for this is that when someone files a dallas bankruptcy attorney assisted bankruptcy, they will do a few things. First, they’ll clear their old, unsecured debt if they file chapter 7 bankruptcy. And the same would be true for many if not most chapter 13 bankruptcies. What that means is that in the absence of the former debt, their credit score actually improves if theirs is a typical case. Next, you have to consider how a credit score is calculated and how a lender looks at a potential new borrower. If a lender wants to know whether a new customer will pay their bills on time, the best indicator of this is what their payment history has been in the past 2 years. They don’t necessarily like to see that you have no debt, although no debt is a good start when compared to someone who is under a mountain of painfully stressful debts. But they do want to see that simple phrase “paid as agreed.”
This is the best indicator of whether a person will pay their new debts on time. And if a person simply pays on time, they will be a steady, reliable debtor for the lender so that the lender can make money off the financing. That’s why they don’t necessarily like to see no debt when considering an applicant for credit.