While our country descends deeper into economic turmoil caused by the coronavirus pandemic, many Americans are searching for answers on how they can get financial relief. Making matters worse, our politicians have come to a stalemate on a second stimulus package. Some with unmanageable debt loads are now turning to bankruptcy in an effort to obtain a fresh financial start. You might have questions on how the bankruptcy process works and how long it will take for you to repair the damage done to your credit. Let’s take a look at what bankruptcy can do to your credit and how long the stain lasts.

Chapter 7 Bankruptcy & Your Credit Report

The most common form of consumer bankruptcy, Chapter 7, typically does not require some unsecured debts to be paid back. Instead, those debts are discharged in an effort to give the debtor a fresh financial start. This form of bankruptcy is also known as a liquidation bankruptcy.

Keep in mind that not every type of unsecured debt can be discharged through Chapter 7. Specifically, domestic relations debt such as unpaid child support and alimony typically cannot be discharged via Chapter 7. Additionally, Chapter 7 has strict disposable income requirements. This means that those with incomes above the threshold may not qualify. While the Chapter 7 bankruptcy process usually takes around three to six months to complete, it will stay on your credit report for ten years from the filing date.

Chapter 13 Bankruptcy & Your Credit Report

Unlike Chapter 7, Chapter 13 bankruptcy does not typically involve the discharge of debt. Instead, a debtor enters into a payment plan using their current income to repay their debt over a three-to-five year period. This is a less common form of bankruptcy and it requires that debtors have a source of income to repay their debts.

Still, there are benefits to this form of bankruptcy such as saving your home from foreclosure and enabling you to reschedule secured debts. Many consumers opt for Chapter 13 because they earn too much money to qualify for Chapter 7 and they possess property that they do not wish to relinquish. Finally, Chapter 13 stays on your credit report for 7 years from the date of filing – three years less than Chapter 7.

Additional Considerations

Deciding to file for bankruptcy is a serious and life-altering decision. This is not something that you should enter into lightly. An experienced bankruptcy attorney can help you determine what is appropriate for your situation and can recommend the best financial path forward for you and your family. The Bankruptcy Team, PLLC is dedicated to assisting clients fix financial dilemmas.

The Bankruptcy Team, PLLC is devoted to assisting clients resolve their financial problems through bankruptcy, foreclosure or other legal avenues so that they can get the fresh start that they are entitled to. We also aim to protect those who have been exposed to unfair debt collection practices such as repeated phone calls, abusive and threatening language, and the use of deceptive methods. Our experienced attorneys will thoroughly review your situation and advise you about available options that closely fit your needs and which protect you from bad debt collectors. To consult with The Bankruptcy Team, PLLC, call or contact us today.