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How will bankruptcy impact your credit rating?

On Behalf of | Aug 23, 2021 | Bankruptcy

Credit is often a necessary part of daily life. In fact, there are several benefits of credit such as allowing individuals to purchase a car or new home.

However, many people find themselves in financial trouble because of credit. The interest rates on credit card bills and mortgage repayments can swiftly mount. When faced with such scenarios, even the smallest setback can have a tremendous effect. Filing for Chapter 7 or Chapter 13 bankruptcy are just some methods that can potentially assist people in getting out of a financial rut.

Bankruptcy and credit scores

Credit agencies will factor in numerous dynamics before providing consumers with a credit score. Most notably, agencies will explore the total debt that a person has and on how many occasions repayments have been missed. Consequently, a person’s credit score might actually improve after filing for bankruptcy because levels of outstanding debt have been reduced.

However, it is important to note that lenders will still seek assurance that debts can be managed after a bankruptcy. Therefore, it is vital that all the personal requirements that come along with a bankruptcy are adhered to.

Is bankruptcy documented on your credit report?

Credit agencies are obliged to list your bankruptcy for specific periods of time. As a result, if you have filed for a Chapter 7 bankruptcy, this will stay on your credit report for up to10 years. Additionally, a Chapter 13 bankruptcy will stay on record for up to seven years.

When faced with insurmountable debts, there are several options available that can help relieve the financial burden. Familiarizing yourself with these possibilities is vital and can assist you in returning to a healthier fiscal position.