Bankruptcy does not ruin your credit.
I does harm credit. But, it may be the best alternative of those available for credit. Most credit decisions rely on a credit score. Most discussions of creditworthiness are about the factors that raise and lower a credit score. To some extent, the assessment of an event’s impact on credit needs depends on the timing of the planned need for credit. Discussing your specific situation with one of our bankruptcy attorneys can assist you in determining the anticipated impact of certain actions upon a credit score. Bankruptcy remains on a credit report of seven years, a Chapter 7 bankruptcy remains on a credit report for ten years.
- Absent bad luck, one who has reasonable fixed rate mortgage and good interest rates for loans may not need credit for more than two years, by which time credit scores may well be on the way to recovery from a bankruptcy.
- Where credit score is a priority, debtors may want to prioritize filing the bankruptcy for when they are confident that they will be able to timely pay future obligations.
- A continuing default may be worse and have a longer term effect for a credit score than bankruptcy, particularly where a default is continuing, the effect on credit can be lengthened by making intermittent payment and extended by making minimal payments that offer nothing towards reducing the debt. The statute of limitations on the debt and the length of time it may properly reflected on a credit report are both commenced anew by making even a single payment (including a settlement). Making payment arrangements on a bad debt can actually extend the time the debt is reflected on credit, particularly if the payment arrangements are reflected on a credit score. The sale of a debt to a new creditor can also extend the report time for the debt.
- A chapter 7 may be better if future credit needs are shorter term because relief is more complete and debtor’s future income is unfettered. A successful chapter 13 may be better in terms of longer term credit needs because this form of bankruptcy falls off the credit report more quickly.
- As part of the bankruptcy plan, financial education and the development of a budget are a critical part of the process. Protect your investment in the bankruptcy by using the breathing room to make improved financial decisions.
- For some, the filing of a bankruptcy is almost necessary in order to stop the cycle. It can save the debtor who has no realistic possibility of recovery before, rather than after resources are exhausted.
- Some put off bankruptcy where default has become inevitable, delaying relief, enduring needless suffering and prolonging the effect of their debt problems. If you are doing without necessities such as food, medications, utilities or medical care to pay credit card debt a filing may be inevitable and your relief enhanced by getting help now.