While no one sets out to file for bankruptcy, the simple matter is that sometimes you are faced with situations that make it difficult or impossible for you to pay your bills. Faced with insurmountable debt and the inability to make payments to your creditors, there is a very real chance that your credit report is already affected. Late payments and accounts in collection lower your credit score and can stay on your record for up to 7 years. The longer you go without making payments, the lower your credit score will be.
You’ve most likely heard the devastating effects filing bankruptcy has on your credit. While it is true that your credit report will decrease an average of 160-200 points depending on which bankruptcy you file, it is also true that filing bankruptcy can be a better solution for your credit in the long run.
When you file for bankruptcy, your credit report will display the bankruptcy and the debts associated with the bankruptcy differently. Since the number of outstanding debts is reduced, your credit score can increase over time.
When you file a Chapter 13 bankruptcy, your debts will remain active until they are paid back, which usually takes between about 5 years with under 1% interest rate tacked on. During that time, you are protected from wage garnishments, bank levies, lawsuits and harassing phone calls from creditors. A completed Chapter 13 bankruptcy will stay on your credit report for up to 7 years from the date of filing. However, after your 5-year payment plan is completed, you will owe nothing to your creditors. You will also start receiving credit card offers in the mail once your payment plan in complete. This will allow you to build our credit quickly.
When you file a Chapter 7 bankruptcy, your debts will be discharged a few months after filing for bankruptcy. And while the actual bankruptcy will remain on your credit report for up to 10 years, you can buy a home within 2 years and your credit score can be back to normal within 12-24 months.
Over time, the items on your credit report associated with the bankruptcy will have less of an effect on your credit score. When you get credit card offers, sign up for them, but make timely payments and you will see your credit score start to improve.
If you are thinking of filing for bankruptcy or have questions about how bankruptcy can affect you, your credit score, and your future chances at credit, please contact us for a confidential and complimentary consultation. One phone call can change your life and put you back on track for leading a life free from debt.