A bankruptcy will affect your credit score more than just about anything. Worse, it will affect it for many years. In the first few years after a bankruptcy, you may not be able to get loans at all.

In short, a bankruptcy is a legal proceeding that either forgives you of your debts or allows you to pay off just a small fraction of your debt. It will nearly ruin your credit rating at first, but it will also allow you to dig out from overwhelming debt and reestablish a good credit rating again after years. A bankruptcy will no longer show up on your credit report after ten years.

If you are very seriously in debt and have no way of repaying your bills, a bankruptcy can help you by stopping collection call agencies and other problems. Also, if you have been very negligent in paying your large debts, your credit rating has already likely suffered greatly.

While a bankruptcy will depress it even further, at least it will give you the chance to repair your credit by giving you a "clean slate" free from large debts.