Gumm & Green, LLP, Attorneys at Law
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Understand the truth about bankruptcy

Those who are planning on filing for bankruptcy in California or any other state should understand its true impact on their credit. For instance, some believe that a lack of negative information on their credit report prior to filing for bankruptcy will reduce its negative impact. However, the fact that someone has filed for bankruptcy will be a significant negative mark regardless of what happened before he or she did so.

Although a person may have a lower credit score after bankruptcy, it is possible for him or her to start rebuilding his or her score in a short period of time. This can be done by getting a secured credit card or making timely payments on debts that remain after filing. Any information on a person's credit report will remain there for seven years. The only exception is a Chapter 7 bankruptcy, which remains on someone's credit report for 10 years.

Once the bankruptcy falls off a credit report, an individual may see his or her score go up significantly. Not all debt can be wiped away in a bankruptcy. For example, a student loan may remain after a case has been discharged and other eligible debts have been wiped away. If a debt is not eliminated in a bankruptcy case, an individual is generally required to continue paying it off.

Filing for bankruptcy may allow for a stay of creditor actions in addition to debts being eliminated or reorganized. This may help a person avoid a foreclosure or repossession as he or she figures out a way to stay current on his or her secured loans. In some cases, it may be possible to obtain a cramdown on a car loan or sell a home before a foreclosure can take place. Debtors may also attempt to renegotiate secured loan terms.

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