The decision to declare bankruptcy is usually difficult, even for people facing overwhelming debts. In most cases, the biggest concern among applicants is how filing for bankruptcy might affect their credit score. So, if this is the reason why you're hesitating to declare bankruptcy, contact an attorney to know the consequences you might face when you file for bankruptcy. This way, you will know whether to declare bankruptcy or consider other options for your financial woes. Here's how declaring bankruptcy could impact your credit rating.
The Effect on Chapter 13 Application
If you declare bankruptcy under Chapter 13, the court will compile all the money you owe into one repayment plan. Then, you will agree on the amount you will be paying monthly and for how many years you will be making the payments. Note that this is a good plan because you will have a more manageable way of repaying your creditors as you meet your other financial obligations. However, to qualify for this chapter, you must have sufficient income to make payments as indicated in your plan.
It is also important to note that your application will remain on your credit record throughout your repayment period. As a result, you will not be able to assume new credit during this time without the court's approval. Therefore, if you're planning to file this chapter, you should talk to an attorney to determine whether this is the right option for your situation. More so, they will explain the filing requirements and the chapter's impact on your borrowing power. Additionally, they will give recommendations on the chapter that might work best for your financial problems.
The Effect of Chapter 7 Application
The most significant difference between Chapters 7 and 13 is that the court sells off some assets after applicants declare bankruptcy. Then, they use the money raised to pay creditors. This is one of the reasons why some people hesitate to file this chapter because they are afraid of losing assets. However, there are several advantages to taking this route. For instance, the law allows you to keep your house and at least one vehicle for each family member. Also, this chapter takes a few months, enabling you to discharge debts faster. However, the chapter will stay on your credit report for a long time. Therefore, you need to consult an attorney before filing to know whether it's the right option.
If you've been putting off declaring bankruptcy because of the impact it might have on your credit rating, contact a bankruptcy attorney for advice. They will assess your financial and personal situation to determine the right chapter for your problems. They will then work with you as you rebuild your life and finances through bankruptcy.