If you have already filed for bankruptcy or are considering filing, the effect it may have on your credit report may raise some concerns.
Bankruptcy will impact your credit report. For how long depends on the type of bankruptcy you file, according to an article in MoneyWise.
If you're filing as an individual, you may file for Chapter 7 or Chapter 13. Determining which one best suits your needs depends on how much debt you owe and how much of it you're able to pay.
Impact of Chapter 7 bankruptcy
Chapter 7 bankruptcy is best utilized if you either default or become unable to pay your creditors. It usually applies to credit card debt, medical bills, and personal loans. It doesn't, however, apply to student loans, taxes, criminal fines, alimony, or child support.
After filing for Chapter 7, your debt may be completely wiped out, but it could have a negative impact on your credit report for up to 10 years. Your score could drop by as much as 200 points, as well.
In order to qualify for Chapter 7, you must pass a means test, which weighs your debt with your income and assets. Certain valuables and property assets could be liquidated to pay back some of the debt. Essential items needed for day-to-day living, however, may be exempt.
Impact of Chapter 13 bankruptcy
If you make too much money to qualify for Chapter 7, but are unable to pay your creditors in full, you may want to consider filing for Chapter 13.
This will remain on your credit report for up to seven years, however. During this time, you will not be eligible for another loan, unless you first file a motion and receive permission from the court.
Chapter 13 bankruptcy requires you to make monthly payments over the course of three to five years while holding on to property and assets.
Is it possible to lessen the impact of bankruptcy?
While there is no minimum amount of time for bankruptcy to stay on your credit report, lessening the impact or duration is unlikely. Bankruptcy can only stay on your credit report for up to 10 years, however.
What you can do, after filing for bankruptcy, is scrutinize your credit report for errors. This could include inaccuracies regarding your personal information, debts, creditors, and timelines. If you find anything that is incorrect, you may file a dispute with your credit bureau. If the bureau finds any errors in your bankruptcy, it may potentially be removed from your report.
If you don't find any errors, you will have to wait the full amount of time for the bankruptcy to fall off your report.
If you're not able to meet your obligations to your creditors, filing for bankruptcy can give you a clean financial start. To learn more about how the process works, speak to an experienced bankruptcy lawyer at Benjamin R. Matthews and Associates, LLC. Contact us online today to set up your free initial consultation.