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Personal bankruptcy in California need not hurt credit

California readers may be interested to learn about ways to preserve your credit score, even if you have to file for a personal bankruptcy. In fact, according to a recent report, an individual can file a personal bankruptcy and still retain a credit score well over 700. Though this is not the case for everyone, it may be something of value for some individuals.

In California and elsewhere across the nation, a person's credit rating can take a hit when they file for a personal bankruptcy. A Chapter 7 can remain on a credit report for 10 years, while a Chapter 13 for only 7 years. The amount of damage done to the credit rating can be controlled by the number of late payments, defaults and collections listed on the report.

According to the recent report, if a person decides to file for a personal bankruptcy before they default on a loan, they may find the damage done to their credit rating relatively low. This is because such creditor actions as a foreclosure or a money judgment can be more damaging long-term than high consumer debts. In many cases, filing for a personal bankruptcy before obtaining such negative collection efforts may be beneficial to people in our state.

Filing for a personal bankruptcy is rarely an easy decision. However, when it becomes clear that such an action is necessary, planning may help to ensure a more positive outcome. If a person can file for the bankruptcy before creditor actions, they may find that they can obtain credit easier and faster than they ever expected, even during a bankruptcy.

Source:, "Wisdom Wednesdays with Lynn Richardson: Bankruptcy Myths," Lynn Richardson, March 6, 2013

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Thomas F. Miles, Attorney and Counselor at Law
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