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August 15 2012


Chapter 7 bankruptcy remains on your credit report for 10 years

Stressful economic periods lead to stressful family finances, which can lead to bankruptcy filings.

Bankruptcy isn't a cure all to lift up all of your financial issues and put a smile on your face, as late-night television advertisements maybe have you believe. But in case it happens to be the sole answer, you should have a complete understanding of options and possible repercussions.

Total U.S. bankruptcies filed during fiscal year 2011 (ended Sept. 30) dropped 8 percent over fiscal year 2010, according to the American Bankruptcy Institute. Filings by individuals or households with consumer debt decreased 11 percent for the nine-month period ended Sept. 30 compared with the same period in 2010.

The decline in personal bankruptcies isn't an indication that the economy is vastly improving, but rather an indication that people can't afford to file. It isn't cheap to file for bankruptcy, with a Chapter 7 bankruptcy costing you anywhere from $1,000 to $2,500 in court and attorney fees and payment is due upfront.

Chapter 7 is the most prevalent personal bankruptcy. It includes no repayment plan. Chapter 13 bankruptcy, also known as the "wage earner's plan," allows people with regular income to develop a plan to repay all or part of their debts.

If you don't have a source of income, you will not qualify to file Chapter 13. If you are unemployed but can make mortgage and car payments, you can file Chapter 7.

While you can keep your house in Chapter 7, unsecured debt such as credit card debt will be discharged. But debt acquired within 90 days of filing may be excluded. This is assurance that you won't go on a shopping spree, which was common under prior bankruptcy laws.

The process is typically completed in a month or two, but results linger. A Chapter 7 bankruptcy generally remains on your credit report for 10 years from the date of filing, while Chapter 13 can remain for seven years.

Since many loan applications ask whether you have ever filed for bankruptcy even after those seven or 10 years are up, bankruptcy follows you around.

Declaring bankruptcy doesn't kill chances of ever getting a loan again, because creditors mostly watch for a few years of good, timely payments on bills. A solid payment history through a low-limit secured credit card is one of the ways to re-establish credit.

Seek help from a certified credit counselor to either find a way out or confirm your suspicions that bankruptcy is your only option before filing.

This article has been shared by Michael Daniels Law. You can find Michael Daniels by searching for bankruptcy Albuquerque - http://www.mdanielslaw.com .

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