One legal alternative offered to those that might be experiencing debt issues is bankruptcy. It’s imperative to be educated about the procedure of filing for bankruptcy protection if you are thinking of it as your option for dealing with your debt. Filing for bankruptcy is a serious choice that might have harmful effects for you and your credit report for time to come. Bankruptcy should be considered as an only remaining option for debt solution.
Points on How Bankruptcy Affects Credit?
- A bankruptcy is reported to credit bureaus and could remain on your credit history for up to a decade. A credit card company or any potential lender will see bankruptcy on an applicant’s credit report and will analyze it has an enormously negative factor of any credit history. A past bankruptcy is seen as more of a risk than than delinquent accounts or accounts in collections.
- Your circumstance will determine how long bankruptcy would be a factor on your credit history. Bankruptcy could be reflected on your credit report for up to ten years if you are filling for chapter 7, while a chapter 13 will be reported for seven.
- The higher your credit score was before filling for bankruptcy the more you credit score would be affected.
- You can get a credit card with a small limit and use it to start building credit again during the time the bankruptcy is involved in your credit history.
- If you are having a hard time getting a credit card after bankruptcy, look into getting a secured credit card. Secured credit cards involve you putting funds into a bank account as a security to the lender if you don’t pay your credit card. Understand the terms of the secure credit card and make sure they are reputable.
- While you are reestablishing good credit over time, filing for bankruptcy will also bring an end to collection agencies from harassing you with phone calls.
Bankruptcy will have an influence on you for sometime but it gives you the chance to start over and start rebuilding in the face of serious dept.
Other Options
Before filing for bankruptcy you should talk to a credit counselor. If dept has you so overwhelmed that you are considering bankruptcy you need to be aware of and exhaust all other options. A Credit counselor will take the time to go over your options and give you the best plan to get you out of dept and start to get your credit back on track. Before filling for bankruptcy some of the other options a credit counselor may suggest could be debt consolidation or dept settlement to name two. Debt consolidation is when you combine all of your debt into one more manageable payment. Some creditors may offer debt settlement programs where you can settle the debt for less than what you owe. Any step you take to get yourself out of debt will have a negative effect on your credit before a positive increase in credit history. Most options effect your credit score far less than if you were to do nothing at all or file bankruptcy.
After filing for bankruptcy, you have a new beginning devoid of the weight of most or all of your debt. With time you can reconstruct your credit history after bankruptcy. By getting a low of credit amount on a credit card and correctly pay your bills on time you will eventually remodel your credit. Bankruptcy will have a negative effect on your credit, but being up to your eyeballs in dept will drive your credit score down with no hope of return. A credit counselor will alert you if bankruptcy is your only option and inform you exactly how it will affect your credit score.
Updated: January, 15 2012