Bankruptcy allows an individual or business to start over by forgiving unpayable debts. The creditors use this opportunity to get some kind of payback. The paybacks depend on the assets available for liquidation.
Filing for bankruptcy is one of the toughest tasks. You can contact the bankruptcy credit repair service to get ideas regarding your credit-related issues. Once you have got a clear idea of bankruptcy, then you can choose whether you are capable of repaying the debt or not.
In this article, we shall discuss the impacts of bankruptcy, how long will bankruptcy stay on a credit report, and how to find a credit repair service.
How Long Will Bankruptcy Stay on Your Credit Report?
Depending on the bankruptcy you have filed, your credit report will carry the bankruptcy statements on them.
Now, consider the two main types of bankruptcy,
Chapter 7 Bankruptcy:
This type of bankruptcy will stay on your credit report for 10 years from the date you have filed.
Chapter 7 bankruptcy is also known as liquidation bankruptcy. This includes selling some or all your property to pay your debts. This is the last chance to clear all your debts by selling your entire property. You will have a limited income but unfortunately, you will not have a home to live in.
You can hire a bankruptcy credit service to help you out with this bankruptcy. You can get a free consultation from a credit repair service to check whether you are eligible for the bankruptcy process.
Chapter 13 Bankruptcy:
This Chapter 13 bankruptcy will stay on your credit report for 7 years from the date you have filed.
This bankruptcy is also known as a reorganization bankruptcy. It gives you an opportunity to retain your property if you complete a repayment plan that is given by the court. The repayment plan is from three to five years.
Will Credit Score Improve After Bankruptcy?
You can start to improve your credit scores over 12-18 months after bankruptcy. Remember that bankruptcy cannot be removed from the credit report unless it is an error.
There are some ways where you can improve your credit scores after bankruptcy.
Check Your Credit Report
Checking your credit report frequently will help you understand your credit report. Your information is updated every 30-45 days. You can get a free credit report copy by contacting the three major credit bureaus (Experian, Equifax, and TransUnion).
In case you have missed payment, you can view them on your credit report. These details will stay on your credit report for seven years. Anyways, by making your payments on time, and clearing all the dues your credit score gets improved.
When you apply for new credit you will find a hard inquiry on your credit report. It will be on your report for two years.
Have a keen look through your credit report. Check if the information provided is correct and accurate. In case of any inaccuracy, you can file a dispute. Get all your inaccuracies cleared as soon as possible.
Think About Savings
While rebuilding your credit, you need to think about making a budget for your income. When you start making a budget, you will have an idea of how to save money in case of any unexpected emergencies.
One of the most important criteria in planning a budget is paying your dues on time, and making full payments. It will help in rebuilding your credit.
Try to clear all of your payment dues and put the remaining amount into your savings account.
Manage Your Credit Cards
It is suggested to manage your credit cards wisely while rebuilding your credit. Throwing away your credit cards is not good if you have a bad credit score. You need to repair your credit by hiring a credit repair service. Closing your credit card will take a hit on your credit scores.
You can reach out to your credit card issuer and explain your financial issue if you are not able to pay the due. You could ask them if they provide any forbearance plans. When your account is under forbearance, your account is temporarily stopped from making payments.
You may be concerned with your credit scores taking a hit. In this case, you can ask your credit card issuer how your credit report will be issued to the credit reporting agencies
Have a Secured Credit Card
Getting a secured credit card will be a good choice for improving your credit scores after bankruptcy.
It is better to have your credit utilization rate be less than 30%. This helps improve your credit score slowly. To maintain this ratio low, you need to make all your secured cards payments on time.
Get to know about Secured Credit Cards
Impact of Bankruptcy on Credit Score
Bankruptcy is a compromise. This eliminates or reduces debt you can not afford to pay, but shows the world you are exposed to credit risk.
This will damage your credit score, which makes borrowing and spending more difficult. Getting a credit card, personal bank loan, or mortgage loan can be very difficult right away. It can also take years for the effects of bankruptcy to dissipate.
Many people who file for bankruptcy will probably have low scores. “When you file for bankruptcy, it will destroy your credit”, is a myth. But the fact is, bankruptcy will help you to increase your credits. Since you cannot find any negative items other than bankruptcy.
Debt Discharges from Bankruptcy
Bankruptcy offers people another chance to start their new financial life.
While talking about both Chapter 7 and Chapter 13 bankruptcies, certain debts are discharged. When your debts are finally discharged, the creditor will no longer make you pay your debt.
Your bankruptcy credit score gets impacted based on the number of debts and the discharged amount. Defaulting on multiple accounts with high balances has a greater impact than eliminating a small amount of debt.
Debts that Never Get Discharged
Some of the non-dischargeable debts are
- When you fail to include a few debts on your credit report while filing for bankruptcy.
- In case of alimony, child support, or any death.
- Some unpaid taxes, like tax liens.
Debts that are Difficult to Discharge
Here are some of the debts that are difficult to discharge,
- Student loans
- Income tax debts
- In Federal Taxes, like Internal Revenue Service (IRS)
Debt Relief Alternative
Debt relief alternative generally involves, negotiating with your creditor to,
- Reduce some of your debts
- Reduce the interest rates
- Extending your repayment time
Pros and Cons of Bankruptcy Credit Repair Services
Pros:
- Bankruptcy gives you a new start to financial life.
- It will eliminate all of your old tax liabilities.
- Bankruptcy will stop missed payments, late payments, or any other negative item that hurts your credit score.
- It will prevent the lenders from the collection process.
- Most state exemptions allow many assets you own to be exempt from bankruptcy.
Cons:
- There are non-dischargeable tax debts.
- Your credit score lowers until you rebuild your credit.
- In case you want to file for another bankruptcy, you will have to wait for years to be done.
- You are not the owner of the credit cards anymore.
- You will not feel comfortable explaining your financial situation to the judge or trustee.
How to Find a Bankruptcy Credit Repair Service?
When you are in search of a bankruptcy credit repair service, then remember the following,
- A free initial consultation. Get an outline regarding your case.
- Get to know about the types of bankruptcy. And in which your case would fall in.
- Know about the paperwork needed for filing bankruptcy.
- Intimate you when your case goes to court.
Medical Bankruptcy
The term medical bankruptcy refers to bankruptcy due to medical debt. Many of our people struggle with excessive medical bills and also struggle with unexpected high healthcare costs. Some of them turn out to be bankrupt to feel free from their debt burden.
Medical Debt for Chapter 7 Bankruptcy
Any sort of medical debt is included in the Chapter 7 bankruptcy.
This Chapter 7 bankruptcy will also relieve you from other debt issues. This will automatically stop most creditors from calling you or accepting money, and even temporarily stop eviction and foreclosure proceedings.
Chapter 7 can be a fairly quick fix for medical debt, as it only takes 90-120 days from the date you file your application to the debt maturity date.
In other words, you can be freed from unpaid medical expenses within four months.
Medical Debt for Chapter 13 Bankruptcy
Chapter 13 bankruptcy is a wage earner’s plan for people with regular income. This may be the best option for you if your medical condition does not completely impede your ability to generate income.
Also Read:
https://thecreditpros.com/how-soon-credit-score-improve-after-bankruptcy/
https://thecreditpros.com/how-long-debt-collector-sue-sued-over-old-debt/
https://thecreditpros.com/why-is-my-credit-score-low-after-getting-credit-card/
Conclusion
Filing for bankruptcy is not an easy choice. Before doing this process, it is better to get help from the bankruptcy credit repair service. They will provide you with options so your credit scores will not have any negative impact.
Rebuilding your credit after bankruptcy is a good start. You must be patient enough to get your scores back. It is because your credit scores will increase in small amounts in the beginning. If you handle your credits in a smart and proper way you will reach your heights.
The ultimate key is to be patient in your rebuilding process. There might be some red flags in this journey but you can practice good credit habits so that you can reach your financial goals.
Frequently Asked Questions
1. What should you not do before filing bankruptcy?
- When you make false statements on your assets
- When you ask for a new debt
- Transferring your assets to your family members
- When you are not consulting an attorney
2. What money is protected in bankruptcy?
You don’t have to give up everything when filing for bankruptcy. You can keep any property that is exempt property, including cash. The difficulty is that most government benefits cannot protect a lot of money. However, you can use wildcard exclusions to handle larger amounts.
