Filing for bankruptcy can seem like the worst possible thing, and to some extent it is, but this should not be the end of your financial plans. You can actually recover from bankruptcy, and all you need to know is to understand what it means to file.
When you file for either Chapter 13 or chapter 7, according to bankruptcy law, it will remain on your credit report for at least 10 years.
When the bankruptcy is listed on the report, it will seriously damage your credit score and make it hard for you to get loans, until it is removed. This, therefore, means that you have to work very hard to regain your creditworthiness.
There are some steps you can take to rebuild your credit.
Chapter 7 Bankruptcy
Consumer bankruptcy under chapter seven will affect you for a long time, but it also allows you to be discharged from all your debts. A lender will not collect from you when you have filed for this kind of bankruptcy.
When your creditors report a discharged debt as delinquent before filing, it will fall off your credit report after seven years, from the delinquency date. If the debt was however not reported, as being delinquent, before filing, it will still be removed after seven years to the filing date.
Chapter 13 Bankruptcy
A chapter 13 bankruptcy will stay on your report for 7 years and unlike chapter 7, filing for chapter 13 consumer bankruptcy involves creating a 3-5 repayment plan for all your listed debts.
According to bankruptcy law, after completing the repayment plan, the debts included are later on discharged.
In case some of the debts are delinquent, then filing for this bankruptcy falls off your report seven years later after the date of filing.
Any other debts will also fall off the report at the same time the bankruptcy falls off.
Bankruptcy Impact on your Credit Score
Your credit score usually is based on the information listed on your report. Bankruptcy negatively affects the score, until the bankruptcy is removed. Therefore, your chapter 7 filing will affect you for 10 years, while chapter 13 will affect you for 7 years.
If however, you practice good habits with your credit, then you may see your score start to recover faster.
The Moore Law Group, LLC
At the Moore Law Group, LLC, we deal with all sorts of bankruptcies and have understood the bankruptcy law. We have helped numerous clients with their filings. Please reach out to us today for this and more.
Fantastic post! Because your credit score is dependent on the information on the credit reports, declaring bankruptcy will negatively influence the score until it is erased. However, this should not be a disincentive to filing for bankruptcy. This is because, with careful financial planning and patience, you can gradually build up your credit score, and this time with far more financial understanding, you will never fail again.