It is important to understand that not all bankruptcy filings are treated the same when it comes to your credit score. The impact of bankruptcy on your credit rating is one of the biggest concerns many clients have. For many debtors, the damage caused by a bankruptcy filing is minimal because their credit score is already low due to negative payment history, asset seizures, lawsuits and garnishments. Even the lowering of your credit score is worth it for most people when compared to the amount of debt they are able to discharge and eliminate in their filing.
If you file for debt relief under Chapter 7, the bankruptcy notation will remain on your credit report for ten years from the date you file your case. A Chapter 13 filing will only be noted on your credit file for seven years from your petition date. The theory behind the shorter time frame for Chapter 13 is due to the fact that Chapter 13 debtors repay a portion of their debt, so their credit score tends to be less affected than a Chapter 7 debtor’s score.
There are many other factors that should be considered when deciding whether to file a Chapter 7 or Chapter 13 case, including:
- Do you qualify? You must pass the means test to file a Chapter 7 and you must have sufficient income to support a Chapter 13 plan.
- Do you need debt relief quickly? The Chapter 7 process usually takes four to six months while a Chapter 13 case lasts three to five years.
- Are there assets you need to protect? Your attorney can help you understand which type of filing is better suited to safeguard different types of assets.
- Can you rebuild your credit? With any type of bankruptcy filing, it is important to understand that you can immediately start working to rebuild your credit rating. With patience and hard work, you might be surprised at how quickly your score begins to improve.
The personal bankruptcy process can be simple and effortless if you retain an attorney who will explain the steps to you. Ms. Anderson is dedicated to walking you through each step, explaining the process along the way. At The Law Office of Diane Anderson, we are determined to help our clients obtain the best results possible.