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Coming Clean: How Long Will Bankruptcy Remain on Your Record and Keep Affecting Your Life? – Collaboration

With many people living paycheck to paycheck, it is very easy for one loss or one emergency to throw off a person’s entire financial stability. This can cause bills and credit payments to fall seriously behind. With all the late fees and increased interest rates, this can quickly become a serious problem with no way to gain back financial control. In these situations, sometimes, the only alternative is bankruptcy. Unfortunately, bankruptcy can come with a plethora of financial issues on its own. It is important that an individual understands all the financial issues and terms that surround filing for bankruptcy. It is also important that they understand how long these financial issues will remain with or without bankruptcy.

Considering Bankruptcy

Bankruptcy is a serious process that comes with a major impact on a person’s credit rating for several years. Bankruptcy is an option that should only be used as a last resort when there is no other method for gaining control of one’s finances. Not only does an individual need to determine if bankruptcy is the best option for them, but they also must determine which type of bankruptcy will help in their situations. It is always advisable for a person to consult with a financial adviser or bankruptcy attorney before making this decision. They can assist individuals in understanding their finances and options available to them. They can also help with the process of filing the right bankruptcy for their particular needs. By visiting https://tulsabankruptcylawyers.net/affordable-bankruptcy-in-tulsa-ok/, consumers can access assistance in the bankruptcy process and understanding their options.

Chapter 7 or Chapter 13

In general, there are two types of bankruptcies an individual can utilize depending on their personal financial situation. Chapter 13 bankruptcy is a type of bankruptcy individuals can use to reorganize their debt in a more manageable plan. This option, known as the wage earner’s bankruptcy, allows consumers to propose a repayment plan with creditors to pay down their debt over a three to five year period. In many cases, if there is remaining debt, it can be discharged at the end of the repayment period.

Chapter 7 bankruptcy is reserved for those with little or no income. In this form of bankruptcy, all property, outside of those properties that are exempt, are sold to pay back creditors. Any remaining debt is discharged at the end of the process. This option is only available to those who are under a certain income. Each state has its own means test to determine who can utilize the chapter 7 bankruptcy option.

How Long Does Bankruptcy Stay on a Credit Report?

A bankruptcy can stay on a person’s credit report for seven to ten years. If it is a chapter 13 bankruptcy, it is automatically removed after seven years, ten years for the chapter 7 bankruptcy. This removal is from the date the bankruptcy is filed, not when the debt is discharged. This can be very beneficial to consumers since it can take some time between filing dates and when the process is complete. There is no need for a consumer to contact a credit reporting agency to have the bankruptcy removed since it will automatically be taken off at the appropriate time.

Do Delinquent Accounts Remain on Credit After a Bankruptcy?

In many cases, a person may have delinquent accounts on their credit report before they file for bankruptcy. This is often a major part of why the bankruptcy was filed in the first place. Although the bankruptcy may pay off or discharge these debts, the record of the delinquency will remain. The delinquency date is the date when the account first became delinquent. This date is not changed by filing for bankruptcy. Just as any delinquent account, the record will not be removed until seven years after the original delinquency date. Since the delinquency date is often before the bankruptcy filing, these delinquent accounts will often be removed before the bankruptcy has been removed.

How Will Bankruptcy Impact Credit Rating?

Bankruptcy does have a serious and negative impact on a credit rating. Bankruptcy can and will impact the credit rating with a decrease anywhere from 160 to 220 points. Many people delay filing bankruptcy due to the impact it will have on their credit rating. Without bankruptcy help, they can find themselves facing difficult financial situations. Unfortunately, this can often cause accounts to become delinquent and seriously impact their credit rating on its own. When the accounts go into collections, this can severely impact a credit rating even further. Filing for bankruptcy after accounts have gone seriously delinquent or into collections only prolongs the impact on the credit rating. It is better to file for bankruptcy when things become unmanageable instead of waiting. This can allow a consumer to begin rebuilding their credit.

How to Improve Credit after a Bankruptcy?

Bankruptcy is not necessarily a seven to ten year sentence of terrible credit. Individuals can take this time to begin rebuilding their credit. With careful attention, planning, and maintaining debt, some individuals can rebuild their credit to good standing before the bankruptcy is removed from the credit report. With the extra effort and a good rating, when the bankruptcy leaves the credit report, an individual can have a very good credit rating. However, there are two aspects to manage to ensure improvement during this time.

  •       Monitor Credit Score

After a bankruptcy filing, it is important to regularly check the individual’s credit report. Everyone should maintain a list of all debts that were included in the bankruptcy. It is important to keep an eye on the status of each of these accounts. If they have been discharged, they should show a zero balance and should not be listed as delinquent. If something is not right, it is important to report the issue with the credit reporting company. They can assist with getting the error fixed.

  •       Re-establish Credit

It is important that those who file bankruptcy begin to re-establish their credit as soon as possible. This includes ensuring that all bills are paid completely and on time. It is also a good idea to begin establishing new credit. However, it is important to work within the person’s financial limits to ensure that they are not over-extended again. There are companies that offer secured credit cards and other lenders available that can assist with establishing new credit. Paying these on time will assist with establishing a strong credit rating. If no new credit is established, when the bankruptcy is removed, individuals can be left with a hole in their credit history. This can often leave them with a credit rating that is similar to someone who has never had credit.

Bankruptcy is not the best option for everyone. However, it is sometimes the only option that can help a person get out from under crushing debt. Before filing, each individual should take the time to research all their options and responsibilities surrounding the bankruptcy. They should also understand the impact it will have on their credit and future credit ratings. Contacting a professional financial advisor or bankruptcy attorney can often be the best resource for those facing financial hardships.