There are many assumed facts about bankruptcy that may not be entirely accurate. Bankruptcy will undoubtedly damage your credit after you file, and may cause a credit score loss of more than 200 points depending on the situation surrounding filing. Still, many people claim that bankruptcy will be more harmful than helpful, and this is simply not true. For an individual facing foreclosure or for someone who is constantly being harassed by creditors, bankruptcy may be a fresh start and a way to get a new perspective.

Many people assume that if there is no negative information on a credit report prior to bankruptcy, that the credit report will have a higher score than if the report already contained derogatory information prior to filing. Essentially, some filers assume that if they have a spotless record prior to bankruptcy, their credit report won't take as much of a hit as if the record already depicted patterns of poor spending.

Admittedly, a credit score will drop to relatively the same low number when a person files for bankruptcy regardless of whether or not the bankruptcy is the only mark on the credit score. The credit score will improve again as the bankruptcy becomes a thing of the past.

Another myth about bankruptcy claims that all information about the bankruptcy will remain on your credit report for 10 years without any exception. This isn't necessarily true. The public record of a Chapter 7 bankruptcy will last for 10 years,but a Chapter 11, 12, or 13 typically only lasts on public record for 7 years.

Also, all trade lines indicating that an account was included in bankruptcy will only last for seven years, and all third party collection dents, judgments and tax liens that were discharged through bankruptcy will disappear from public record after bankruptcy. Any public records from a Chapter 13 bankruptcy will also be removed at seven years.

Some people assume that a bankruptcy will cause them to have a low credit score for as long as the bankruptcy information is on the credit report. This is also a false assumption. In fact, individuals who manage their finances strategically after a bankruptcy can get a jumpstart on improving their credit.

Individuals will need to add positive credit such as secured credit and installment loans to start boosting their score, and will need to make on-time payments on all remaining debt and avoid accumulating new debt. Also, individuals should work to keep low balances on credit cards that make up less than 25% of the credit limits.

Another myth: filers assume that bankruptcy impacts all consumers similarly and that the amount of debt discharged or the number of debts included in the bankruptcy will not change the way that the bankruptcy appears on a credit score. In fact, credit scores will vary depending on the magnitude of the bankruptcy and the amount of debt discharged. A low debt that is spread over only a few accounts will result in a higher bankruptcy score than one for which the scope of the bankruptcy is more extensive.

Lastly, many filers believe that any credit history that is associated with accounts that are included in bankruptcy will be removed from their credit report after the bankruptcy takes place. Instead, all of the bankruptcy-related history will appear on the credit report and will be considered by the scoring formulas for the entire seven to ten post-bankruptcy years. Contact a bankruptcy attorney if you have more questions about how your bankruptcy will affect your credit score or how you should handle this situation.