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.