In the world of personal finances, there aren’t many words scarier than “bankruptcy.” It can be like a scarlet letter on our chest, for all the world of banks, credit card companies, and others to see.
I’ve had a few people go through bankruptcies, and I’ve even counseled some people to file for it. I’ll walk you through what it really means, and what it means going forward.
Why Do People File Bankruptcy?
Bankruptcy is a legal mechanism by which you file for legal protection from creditors and collection agencies. It’s basically throwing up your hands and saying, “I’m done!”
The good news is that modern bankruptcy isn’t the end of the world. In many cases you’re able to keep your home, if you’re an owner, and even keep credit cards or car loans, in other cases.
All of your other debts are wiped away–squashed, eradicated, erased. Even medical bills can be wiped out by bankruptcy. No more phone calls, no more letters, no more multiple items on your credit report.
But there is a cost, and there will still be one thing on your credit report, something big–the B-word.
How Long the B-Word Lasts
It might sound like Bankruptcy isn’t that bad, and like I said, for some people it’s a godsend. But you need to know that there is no way to expunge a bankruptcy from your record if you filed for it.
There’s no lawful way to remove a bankruptcy once it is legally reported.
If you have already filed bankruptcy, there’s still hope. Even if your credit has dropped as a result, that doesn’t mean there aren’t ways to build your credit. Secured credit cards and becoming an authorized account user are still viable and excellent ways to rebuild your credit score.
Another thing to keep in mind is that once the bankruptcy is gone, that chapter of your life is over, and you can move forward with a clean slate.
One last note, if you have seen an erroneous or fraudulent bankruptcy on your credit report, you need to report it and dispute it immediately. The Consumer Financial Protection Bureau is a great place to start, or any trustworthy attorney.