If you are in a tough financial situation right now, you may worry about finding solutions to your quickly accumulating debt, especially if your income has recently taken a hit. While filing for bankruptcy could help you to address your debts in the short term, it is wise to consider whether the filing will have any long-term consequences.
Filing for bankruptcy will affect your credit score to some extent, depending on which bankruptcy Chapter you file. Therefore, it’s important that you weigh the consequences of bankruptcy in addition to the short-term advantages so that you can choose the best option for you.
How will bankruptcy affect my credit report?
A bankruptcy filing will be present on your credit report for a certain amount of time depending on which bankruptcy Chapter you file. If you file for Chapter 13 bankruptcy, the bankruptcy will remain on your credit report for seven years after the filing date. If you file for Chapter 7 bankruptcy, the bankruptcy will remain on your credit report for 10 years after the filing date.
Why is my credit score important?
Having a bankruptcy listed on your credit report can mean that you will not be able to borrow in the future. It may affect your ability to purchase a home or a car, get credit cars or take out loans.
What other implications can a bankruptcy have?
First of all, when you file, you’ll need to get rid of your credit cards. Credit cards have probably enabled you to get into debt in the past, so removing them from your life could be a good thing. You’ll also need to make financial sacrifices, potentially saving your disposable income to pay off debts or liquidating assets.
While it’s necessary that sacrifices are made when filing for bankruptcy, there are also many advantages. Filing for bankruptcy could help you to get a fresh financial start.
