Struggling to manage your finances is more common than you think. When people have a huge amount of debts like credit card bills, student loan, etc. filing for bankruptcy might be an excellent way to get rid of them. However, there are consequences to this act warn Dallas based bankruptcy law firm Recovery Law Group lawyers. Bankruptcy can negatively affect your credit rating. Depending on which chapter of bankruptcy you file, it could remain on your credit report for as long as 10 years. However, people without any other option might end up filing for bankruptcy.
Prior to the bankruptcy filing, it is advisable to seek professional opinions, such as that of a non-profit credit counselor or an experienced bankruptcy attorney. This will help them get knowledge about other viable options like debt management, debt settlement, etc. In case filing for bankruptcy is the best choice, you can consult with bankruptcy lawyers at 888-297-6023 to find out which chapter of bankruptcy would suit you best.
Which chapter of bankruptcy should you choose?
If bankruptcy is the best way to get rid of your debts, you need to decide between Chapter 7 and Chapter 13. Filing for bankruptcy requires an assessment of your income, assets, as well as your debts. Changes in laws being made in 2005, it is not easy to get rid of debts through bankruptcy. Certain debts like a student loan, income tax, alimony and child support or other government fines cannot be discharged through bankruptcy. Individuals who have an income less than the state median for an equal number of household members are eligible to file under Chapter 7. For others who fail to qualify the means test, Chapter 13 bankruptcy is the best bet to get rid of debts. Both chapters affect people differently.
Chapter 7: In this type of bankruptcy, all unsecured nonpriority debts are discharged without paying anything back. Since no debts are repaid, this bankruptcy remains on your credit report for a period of 10 years.
Chapter 13: In this case, the debtor pays some portion of their debt through a court-approved plan over a previously agreed timeframe. Any remaining unsecured nonpriority debt is discharged after that duration. Since some part of the debt is paid, this chapter of bankruptcy remains on your credit report for 7 years only.
The credit agency automatically removes the bankruptcy from the credit report after seven or ten years depending on which chapter of bankruptcy it was filed under. Most people who file for bankruptcy have delinquent accounts. These accounts are also deleted seven years from the date they became delinquent. Since in most cases, the accounts became delinquent prior to the bankruptcy filing, they will be deleted prior to the bankruptcy public record.
Effect of bankruptcy on your credit
Bankruptcy filing makes you a high-risk candidate for lending. Thus, you will either not get a loan, or get one at a higher interest rate. It may also hamper your chances of getting a decent job. Thus, it is important to make immediate efforts to rebuild your credit to increase your credit score. This can be done by paying bills on time every month, not taking out unnecessary debt and living strictly as per a designed budget. With better credit score, soon, you will be able to get a loan at lower interest.