Bankruptcy And Your Credit Report

Many people who are considering filing bankruptcy are interested in knowing how long the fact that they file bankruptcy will stay on a credit report. The answer is that proof of bankruptcy filing can last up to 10 years on a credit report. However, this fact should not dissuade one from filing for bankruptcy if overwhelming debt is a major concern.  Most clients are surprised at just how fast they receive offers for credit after they file for bankruptcy relief. For example, they can apply for credit cards immediately after a bankruptcy case filed under chapter 7. They will get offers for credit cards typically within six months to one year after filing. Now these cards may have high interest rates, annual fees, and lower credit limits than someone who did not file for bankruptcy.  However, this is a good way to start to rebuild credit after bankruptcy.

 

A recent client was alarmed that a bankruptcy filing would stay on the credit report for 10 years. This person almost considered backing out of the bankruptcy simply because it was going to be listed on the credit report. However, once I spoke with him and explained that the mere fact that it sits on a credit report for 10 years will not preclude him from getting credit in the future, he felt much better about filing. After all, he had over $40,000 worth of credit card debt as well as $10,000 worth of medical debt. The real issue for him should not have been how long the bankruptcy filing would last on his credit report but rather, how soon could he get out of debt in the first place.

 

The United States is a country that offers second chances in many facets of our lives. This is also true from a financial standpoint. Most people that file for bankruptcy can avail themselves of credit opportunities in the future. They just have to be smart about the types of credit they apply for and as to how they use their credit in the future. The last thing that I want to see as a bankruptcy attorney is to have somebody that I helped fall back into debt in the future. Bankruptcy is an opportunity to relieve oneself of burdensome debt. It should not be used as a tool to continually obtain and abuse credit.

 

For those of you that may be struggling financially, please be aware that there are two major chapters of the bankruptcy code that apply to consumers. Those chapters are chapter 7, which is known as a fresh start and chapter 13, which is commonly referred to as a reorganization plan. The two cases are completely different. The two cases have different fee structures. The two cases provide for different results depending upon your personal situation. For example, if you have significant equity in assets, then chapter 7 is not going to be helpful to you. Chapter 13 however, will allow you to maintain your assets while you’re in a reorganization plan to repay either all or a portion of your debts over a 3 to 5 year period.

 

Chapter 7 bankruptcy is the most common form of bankruptcy. It is used by individuals and families that have little in the way of assets, yet have dischargeable debt. Dischargeable debt includes credit cards, medical bills, personal loans, past-due utility bills, auto repossession deficiencies, mortgage deficiencies, and most other types of debt. Non-dischargeable debt would be student loans, recent taxes, parking tickets, child support, and debts incurred by fraud. Your attorney will be able to sit down with you, analyze your situation, and make a recommendation as to which chapter under the bankruptcy code is going to provide the proper relief for you.

 

For more information about bankruptcy and your rights under the bankruptcy code, you can contact my office at 847-520-8100. I always offer a free, initial consultation and you will find the advice extremely valuable.

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