Bankruptcy and Your Credit Report
Bankruptcy can be a terrifying thought, and a very stressful process to go through. When you are considering bankruptcy, you may feel as though you have somehow failed yourself, and your family, if you have one. It is not, however, the end of your financial career. Some lenders will still consider lending to you, at a very high interest rate, after a bankruptcy filing. In the beginning, however, you will be denied new accounts almost anywhere you seek a credit line.
How Bankruptcy Affects Credit Reports
It is important to know which type of bankruptcy you will file for, though both will stay on your credit report for up to ten years. You should certainly wait as long as possible to file, as you can only do so once every six years. Filing for bankruptcy can eliminate your legal obligation to pay all, or most, of your debts, as well as stop repossessions, foreclosures, and wage garnishments.
Filing for Bankruptcy
Filing Chapter 7 bankruptcy is a "liquidation", and will cancel your debts, but you will have to give up any nonexempt properties; you can keep secured properties such as a home or car if you are current on the payments and can continue to make them. Filing Chapter 13 bankruptcy, or "reorganization", allows you to keep valuable property as well, though you will have to prove that you can continue to make the necessary payments. This will usually be a monthly payment, combining your current payment with an addition towards what you began to default on. With Chapter 13, you can expect to have between three and five years to pay the defaulted part of your loan.
Before filing, it is absolutely essential that you meet with a credit counselor, as there may be other options for you. By working with a legitimate credit repair agency, you may be able to consolidate debts into a lower monthly payment, and issue an order for creditors to stop calling. Bankruptcy is not a quick-fix solution to your debts and will remain a black mark on your credit report for a long time. It should only ever be used as a last resort, with very careful thought, and advisement from a reputable credit counseling service.
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