How does bankruptcy affect my credit score, and how long will it stay on my record?

If you have grinding debt that leaves you facing grim financial circumstances, bankruptcy can provide you with far more stable financial footing. It is also, however, very likely to negatively impact your credit score. If you’re considering bankruptcy, there’s a good chance that your credit score isn’t doing you any favors to begin with. Sometimes, the only way out of a financial mess is by powering through it, and bankruptcy can help you accomplish this. Ultimately, the financial benefits you experience as a result of bankruptcy can more than make up for the hit your credit score will take. Discuss your best options with an experienced Columbia, SC, bankruptcy attorney today.

The Form of Bankruptcy You File

Both Chapter 7 bankruptcy, which is for those who earn less, and Chapter 13 bankruptcy, which is called wage earner’s bankruptcy and is best suited for those who earn a regular income, will have an effect on your credit score, but the way they do so is distinct. The bottom line is that those who are interested in your credit score – namely lenders – can easily access bankruptcies on your credit reports, and they make their financial decisions accordingly.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is a liquidation process in which you sell off your nonexempt assets – if you have any – and the proceeds are used to pay your creditors at least some of what you owe them. In the process, your debts will be erased from the books – other than secured debts that you continue making payments on, priority debts such as child support or alimony, and a few additional exceptions.

Exempt assets that will not be liquidated include:

• Your home up to a specific amount of equity
• Your car up to a specific amount of value

If your ownership in these assets exceeds the set limits, which are relatively low, you can lose these primary assets. While Chapter 7 bankruptcy can work very well for those with few assets and a considerable amount of debt, it stays on the filer’s record for ten full years.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy allows you to reorganize your debt. In the process, you’ll be required to catch up on your payments for your secured debts, such as your car and home, and to make monthly payments on your unsecured debts, such as your credit cards and medical bills, for a specific amount and duration – as determined by the court in relation to your financial circumstances. Chapter 13 bankruptcy will remain on your credit reports for seven years.

Make the Call to an Experienced Columbia, South Carolina, Bankruptcy Attorney Today

The formidable Columbia, South Carolina bankruptcy attorneys at Reed Law Firm unleash the full power of our impressive experience and legal savvy for every client we skillfully represent, and we welcome the opportunity to also help you. Bankruptcy can play an important role in your future financial security, so please don’t hesitate to contact us online or call (803) 726-4888 for more information today.