Being in serious debt is a lot like being in prison, emotionally . You may feel trapped and anxious for months or even years, with no relief. The overwhelming majority of Americans who are considering Chapter 7 bankruptcy are under financial stress because of medical expenses, a job loss, a divorce or another setback.

Even if you are struggling with massive debt, you may still be worried about the impact a Chapter 7 filing will have on your credit scores, which will probably take a significant dive after you file. Friends, family members and bloggers may be telling you things like:

  • “Your credit will be destroyed for seven to 10 years if you declare bankruptcy.”
  • “Your credit will be ruined. You won’t be able to get a mortgage or buy a car.”
  • “You won’t even be able to get a credit card or a loan.”
  • “You’ll pay a lot more for car insurance and other things.”

Some of these kinds of claims are true, some are partly true and some are false. It’s important to get the facts about bankruptcy and your credit.

Credit scores and credit reporting

After a Chapter 7 filing, which can eradicate credit card debt, medical debt and other burdens, your credit scores will drop, unless they are already very low — most people know that. But what are the potential short-term, medium-range and long-term impacts on your life?

For one thing, it is important to understand the difference between credit scores and the presence of a past bankruptcy on your credit reports. In short, your credit scores will be low for awhile, but then they will climb as you are able to pay all your bills on time; your scores could be high in a couple of years.

Though a bankruptcy may “show up on your credit report” in the future, that doesn’t mean your credit scores will be low. And good credit scores are actually the key to “getting credit” for loans and so forth. In some cases, it’s possible for consumers to obtain a decent mortgage within two years of a bankruptcy filing.

Get advice from a pro, not your brother-in-law

Filing for bankruptcy is an important choice. Your friends and family members may mean well, but in all likelihood they don’t know nearly enough to give you reliable advice about your debt problem. You should understand the pros and cons of Chapter 7 bankruptcy before you make a decision about it.