A reader’s bankruptcy is due to come off her credit reports, and she wants to know if she has to do anything to “scrub it off” herself.

Q: I filed Chapter 7 bankruptcy on March 1, 2002. Will the credit agencies automatically remove it from my credit history? If so, when? If not, what do I need to do to get them to remove it? – Maria

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A: Under the federal Fair Credit Reporting Act, bankruptcies may be reported for no more than ten years from the date of filing. That means your bankruptcy should no longer appear on your credit reports after March 2012. (If you had filed Chapter 13, where you pay back some of your debts over time, your bankruptcy would no longer be reported after March 2009 – seven years after you filed. That’s because the credit reporting agencies voluntarily stop reporting Chapter 13 bankruptcies – in which debtors pay back some or all of their debts over several years – seven years from the date of filing.)

This “scrubbing” process should happen automatically, and since the ten-year mark is less than a month away, it may already be gone from your reports. It would be a good idea for you to get free copies of your credit reports at AnnualCreditReport.com in late March 2012 to make sure your bankruptcy is gone. Go ahead and order copies from all three major credit reporting agencies; Equifax, Experian and TransUnion. They don’t share information with each other, so you’ll want to make sure each one has stopped reporting that information.

[Related Article: Reader Question: Improving Credit and Refinancing a Mortgage After Bankruptcy]

And while it’s great that you are finally putting this behind you, keep in mind that you need positive credit references to earn a strong credit score. So if you have been avoiding credit, you may want to consider getting a credit card to establish a positive payment record. Keep your balances low and pay your bills on time, and you’ll truly be off to a clean start.

Image: D Sharon Pruitt, via Flickr

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The idea might make some shudder: Debt can be good? Believe it or not, it is actually good to have certain types of debt in your financial portfolio, assuming you are comfortable with owing money. Why? Because it is through debt that you can acquire assets such as housing, automobiles and other types of property. In short, the strategic use of good debt can improve your finances and help you achieve your dreams and goals.

However, beware, as debt falls into three categories—the good, the bad and the ugly! Ugly debt and bad debt, of course, will do the opposite of what good debt can do for you.

[Article: 5 Credit Card Catastrophies (and How to Avoid Them)]

Ugly debt is easy to define.  More often than not, you acquire this kind of debt when your expenses exceed your income because you are in a situation beyond your control—for example, you lost your job or you had to take a pay cut—and so you use credit cards to pay your expenses. If your situation does not turn around, even making the minimum monthly payment on those accounts could become impossible, and filing for bankruptcy may be your only way out. Given the state of our current economy and the rising rate of bankruptcy in past years, it’s clear that many, many Americans have become all too familiar with ugly debt.

Bad debt is unsecured debt that increases because you use credit cards to live beyond your means—maxing out your credit cards by charging luxury items, vacations and the like. This can lead to your only being able to afford the minimum monthly payments, which costs you more in the long run. This is also how bad debt can spiral into ugly debt.

[Free Credit Calculator: Use Credit.com's Credit Report Card]

Good debt is debt that helps you achieve a positive result within a specific period of time, helps you increase your assets and, slowly, your net worth. This is the kind of debt that financial advisors are comfortable with and will even encourage their clients to take on. A mortgage is a common example of good debt, assuming that it has a favorable interest rate (usually defined as 5% or lower), is not an interest-only, variable-rate, or adjustable rate loan, and has monthly payments you can comfortably afford. A good mortgage allows you the possibility of home ownership over time within your ability to repay.

A loan to finance the purchase of a sensible automobile is another example of good debt, assuming the loan has an interest rate of less than 9%. And by “sensible,” I’m talking about a car that is high performance, gets great gas mileage, meets your transportation needs, has a good safety record, fits your budget and, yes, looks good.  Let’s face it—no one wants to drive an ugly car! Although your car will begin to depreciate in value as soon as you drive it off the lot, in today’s society owning a vehicle is a necessity for most of us.

An education loan can be good debt, assuming that the education you finance will help you better yourself—by increasing your income, expanding your job opportunities, or by moving you onto a new, more promising career path. Never borrow more than you honestly believe you can repay and use the money to attend an accredited institution only. The adage that “no one can ever take away your education” is true. Education is an investment in you and, following these guidelines, the price you pay can be well worth the effort.

[Featured Products: Research and compare loans at Credit.com]

A final word of advice: Before you take on any kind of good debt, consult with a professional financial advisor. The advisor will help you make sure that you can afford the debt and that you can truly benefit from it, and that you’re not throwing good money at an unwinnable payoff.  Used carefully, good debt can reap rewards down the road, and provide the ability to better your life and finances.

Image: Wolfgang Staudt, via Flickr.com

The idea might make some shudder: Debt can be good? Believe it or not, it is actually good to have certain types of debt in your financial portfolio, assuming you are comfortable with owing money. Why? Because it is through debt that you can acquire assets such as housing, automobiles and other types of property. In short, the strategic use of good debt can improve your finances and help you achieve your dreams and goals.

However, beware, as debt falls into three categories—the good, the bad and the ugly! Ugly debt and bad debt, of course, will do the opposite of what good debt can do for you.

[Article: 5 Credit Card Catastrophies (and How to Avoid Them)]

Ugly debt is easy to define.  More often than not, you acquire this kind of debt when your expenses exceed your income because you are in a situation beyond your control—for example, you lost your job or you had to take a pay cut—and so you use credit cards to pay your expenses. If your situation does not turn around, even making the minimum monthly payment on those accounts could become impossible, and filing for bankruptcy may be your only way out. Given the state of our current economy and the rising rate of bankruptcy in past years, it’s clear that many, many Americans have become all too familiar with ugly debt.

Bad debt is unsecured debt that increases because you use credit cards to live beyond your means—maxing out your credit cards by charging luxury items, vacations and the like. This can lead to your only being able to afford the minimum monthly payments, which costs you more in the long run. This is also how bad debt can spiral into ugly debt.

[Free Credit Calculator: Use Credit.com's Credit Report Card]

Good debt is debt that helps you achieve a positive result within a specific period of time, helps you increase your assets and, slowly, your net worth. This is the kind of debt that financial advisors are comfortable with and will even encourage their clients to take on. A mortgage is a common example of good debt, assuming that it has a favorable interest rate (usually defined as 5% or lower), is not an interest-only, variable-rate, or adjustable rate loan, and has monthly payments you can comfortably afford. A good mortgage allows you the possibility of home ownership over time within your ability to repay.

A loan to finance the purchase of a sensible automobile is another example of good debt, assuming the loan has an interest rate of less than 9%. And by “sensible,” I’m talking about a car that is high performance, gets great gas mileage, meets your transportation needs, has a good safety record, fits your budget and, yes, looks good.  Let’s face it—no one wants to drive an ugly car! Although your car will begin to depreciate in value as soon as you drive it off the lot, in today’s society owning a vehicle is a necessity for most of us.

An education loan can be good debt, assuming that the education you finance will help you better yourself—by increasing your income, expanding your job opportunities, or by moving you onto a new, more promising career path. Never borrow more than you honestly believe you can repay and use the money to attend an accredited institution only. The adage that “no one can ever take away your education” is true. Education is an investment in you and, following these guidelines, the price you pay can be well worth the effort.

[Featured Products: Research and compare loans at Credit.com]

A final word of advice: Before you take on any kind of good debt, consult with a professional financial advisor. The advisor will help you make sure that you can afford the debt and that you can truly benefit from it, and that you’re not throwing good money at an unwinnable payoff.  Used carefully, good debt can reap rewards down the road, and provide the ability to better your life and finances.

Image: Wolfgang Staudt, via Flickr.com

A new study has found that there has been a significant increase in the amount of consumers seeking the help of bankruptcy attorneys as a result of outstanding student loan debt.

The National Association of Consumer Bankruptcy Attorneys recently reported that 81 percent of those professionals surveyed said that the number of potential clients with sizable student loan balances has increased either “significantly” or “somewhat” in the last three or four years.

[Credit Check Tool: Try Credit.com's Free Credit Report Card]

Nearly half—48 percent—said the increase was significant, and 39 percent said the number of student loan cases they handled has risen between 25 and 50 percent in that time. Another 23 percent reported increases of between 50 and 100 percent. In all, 95 percent said they were only able to help a small number of student loan debtors to obtain a discharge of those balances as a result of undue hardship.

As a consequence, there are very real concerns that these outstanding balances could create a debt problem nearly equivalent to that observed during the housing meltdown. The average college graduate carried a debt bill of $25,250 in 2010, up 5 percent, and education debt burden has grown 47 percent for those between 35 and 49 percent.

This may be especially troubling because in nearly all cases, consumers who seek out bankruptcy protection are not able to get their student loan debt cleared as part of the filing.

[Student Loans: Research and compare options for student loans at Credit.com]

“Take it from those of us on the frontline of economic distress in America: This could very well be the next debt bomb for the U.S. economy,” said William Brewer, president of the National Association of Consumer Bankruptcy Attorneys. “The amount of student borrowing crossed the $100 billion threshold for the first time in 2010 and total outstanding loans exceeded $1 trillion for the first time last year.”

In addition to student loan debts, many college graduates also enter the workforce with at least a few thousand dollars in credit card debt spread across a number of accounts. Recent legislation related to borrowing for those under the age of 21 has helped to mitigate this problem somewhat, but the process has been slow, and is exacerbated somewhat by a job market that is still difficult for many to navigate.

A new study has found that there has been a significant increase in the amount of consumers seeking the help of bankruptcy attorneys as a result of outstanding student loan debt.

The National Association of Consumer Bankruptcy Attorneys recently reported that 81 percent of those professionals surveyed said that the number of potential clients with sizable student loan balances has increased either “significantly” or “somewhat” in the last three or four years.

[Credit Check Tool: Try Credit.com's Free Credit Report Card]

Nearly half—48 percent—said the increase was significant, and 39 percent said the number of student loan cases they handled has risen between 25 and 50 percent in that time. Another 23 percent reported increases of between 50 and 100 percent. In all, 95 percent said they were only able to help a small number of student loan debtors to obtain a discharge of those balances as a result of undue hardship.

As a consequence, there are very real concerns that these outstanding balances could create a debt problem nearly equivalent to that observed during the housing meltdown. The average college graduate carried a debt bill of $25,250 in 2010, up 5 percent, and education debt burden has grown 47 percent for those between 35 and 49 percent.

This may be especially troubling because in nearly all cases, consumers who seek out bankruptcy protection are not able to get their student loan debt cleared as part of the filing.

[Student Loans: Research and compare options for student loans at Credit.com]

“Take it from those of us on the frontline of economic distress in America: This could very well be the next debt bomb for the U.S. economy,” said William Brewer, president of the National Association of Consumer Bankruptcy Attorneys. “The amount of student borrowing crossed the $100 billion threshold for the first time in 2010 and total outstanding loans exceeded $1 trillion for the first time last year.”

In addition to student loan debts, many college graduates also enter the workforce with at least a few thousand dollars in credit card debt spread across a number of accounts. Recent legislation related to borrowing for those under the age of 21 has helped to mitigate this problem somewhat, but the process has been slow, and is exacerbated somewhat by a job market that is still difficult for many to navigate.