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The Fundamentals Of Bankruptcy And Your Credit Report

The Fundamentals Of Bankruptcy And Your Credit ReportFiling for bankruptcy to discharge credit card debt is a difficult decision. If you’re reading this, you’re probably wondering how your bankruptcy filing would affect your credit record. Many people considering bankruptcy are under the mistaken assumption that if they file, their credit scores will be permanently damaged. Simply expressed, this is incorrect. Bankruptcy rules were enacted to give those a fresh start who had fallen into difficult financial situations. If filing bankruptcy permanently destroyed your credit score, it would negate the point of bankruptcy. Because they no longer have any debt, some filers’ credit scores instantly improve after filing for bankruptcy. Remember that there is no assurance that your credit score will improve; everyone’s financial circumstances are unique, and what you do (or don’t do) to restore your credit will be essential.

The impact on your credit score or FICO score will be determined by how your credit score was prior to filing bankruptcy. Is there a lot of negative information on your credit report? Did you make on-time payments on your credit card bills? Have your student loan payments fallen behind?  Have you accumulated a large number of secured credit card bills, unsecured loans, or secured loans? Do you have any chargebacks?

Do you have any judgements on your credit report? These are some of the factors considered by the three major credit agencies (Equifax, Transunion, and Experian) in calculating your credit score. When you declare bankruptcy, the credit bureaus are notified. If you had good credit before declaring bankruptcy, you may notice a minor drop as a result. Most people considering bankruptcy have a poor credit score by the time they submit their case.

The length of time your bankruptcy filing will have an effect on your credit score is determined by how low your credit score was before to filing and how good you are at repairing your credit. With a Chapter 7 bankruptcy, your debts are erased around four months after you file your case, so you can start rebuilding your credit right immediately. Nevertheless, because Chapter 13 is a 3-5 year process, it may take longer to begin restoring your credit score. For most, the rebuilding process will begin several years after the complaint is filed. Yet, if you are concerned that lenders would never grant you knew credit again, you may be certain that they will!

A Brief Overview of Chapter 13 Bankruptcy

Those with an income can use Chapter 13, often known as a wage earner’s plan, to return all or a portion of their obligations. Those earning more than the median income must follow a five-year repayment schedule under Chapter 13. If your salary is less than the median, you will only be required to contribute to a three-year plan. A Chapter 13 trustee will distribute your monthly payments to your creditors in accordance with the conditions of the plan. You will not be permitted to accrue additional debt while in Chapter 13 without prior consent from the court. You can make a contact with a professional Bankruptcy Attorney in Miami Gardens, FL for further details according to your situation.

Michael Lee, Esq.

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