Many people think bankruptcy is bad. However, bankruptcy has its place for those individuals who are buried in debt. Bankruptcy allows a person to get a "fresh start" on their life.
Impact on Credit
People think bankruptcy is bad, because they know bankruptcy gives you negative credit. While most people are concerned about the impact on their credit, most people who file bankruptcy are currently behind on their credit. As a result, that individual’s credit is already bad.
While the bankruptcy will appear on the credit report, once the bankruptcy is filed, it should stop the negative reporting by multiple creditors. The creditors should list that the account was included in a bankruptcy. As a result, the person’s debt-to-income ratio actually becomes better.
Reporting Bad Credit
Additionally, bad credit remains on your credit report for seven years typically. Until the debt is satisfied, a creditor could continue to report bad credit for years. Even though the bankruptcy stays on your credit for ten years, this may be a shorter time than the other credit can continue to report negative credit.