How will filing bankruptcy affect my credit score?

The Credit Implications of Filing for Bankruptcy

It is never an easy decision to file bankruptcy.  Often times, medical expenses, job loss, or a family death can push someone towards filing for bankruptcy.  They know it’s the best thing for their situation and for their family but may wonder how long this will follow them around, and what filing for bankruptcy will do for their future. Here, an experienced bankruptcy attorney, such as the attorneys at Zellar & Zellar, Attorneys at Law, Inc., will discuss the credit implications of filing for bankruptcy.

How does bankruptcy affect credit?

When determining how bankruptcy affects someone’s credit, they need to look at the type of bankruptcy they’re filing.  Chapter 7 and Chapter 13 bankruptcies can stay on a credit report for between seven and ten years after filing, but creditors look more favorable upon Chapter 13 as opposed to Chapter 7 bankruptcy. This is in part because Chapter 13 allows someone to continue paying on their debt over three to five years.

By contrast, they are not required to repay debts when they file Chapter 7 beyond liquidating non-exempt assets and paying creditors from those proceeds. Either way, both types of bankruptcy eventually put them in a better position to rebuild their credit because they’ve taken the steps to free up their obligations to pay their old debts, essentially starting over.

No doubt at first, someone’s credit report is not going to fare well with a new bankruptcy attached to it. But, over time, their credit report will, in fact, improve.  Additionally, if a Debtor has secured debt that they intend to keep (such as a car payment or mortgage payment), current payments on those obligations will also help rebuild credit.  As long as any new debt that the individual is able to obtain is paid on time, and that there are no other blemishes on their credit report, the bankrupt individual will see that with time, the credit score will improve.

There is no way to get through the bankruptcy process without having implications on someone’s credit. And, it’s possible that someone will not qualify for Chapter 13, leaving them with no choice but to file for Chapter 7. The best thing they can do for themselves is to contact an experienced attorney at Zellar & Zellar, Attorneys at Law, Inc., for more information on the entire bankruptcy process. One of our experienced bankruptcy attorneys will review your entire situation in order to help make an informed decision.  Call our office today to schedule your free consultation.

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