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You Deserve Financial Relief

Russell G. Small and Kenneth Lenz

How bankruptcy can affect a credit report

| Oct 3, 2019 | Bankruptcy

Many people in Connecticut are struggling to make ends meet. They may suffer significant credit problems as well as collector calls and ongoing harassment when dealing with substantial amounts of unrepayable debt. While personal bankruptcy can offer a path to relief, many may be hesitant to take the step to file because they are concerned about the effects on their credit reports. People who are unable to pay their bills may already be suffering from bad credit scores, and the effects of bankruptcy can be different depending on each person’s situation.

The most common form of personal bankruptcy is Chapter 7 bankruptcy. In this type of bankruptcy, most debts can be forgiven, including credit card debts, personal loans or medical costs. Chapter 7 bankruptcy is available for people who make approximately the median income or below, and it can remain on a person’s credit report for 10 years. Depending on the filer’s original credit score, Chapter 7 could make it drop by as much as 200 points. The drop may be less significant if the filer has already accumulated a string or late of non-payment records. When filing for Chapter 7 bankruptcy, people must liquidate most of their assets.

On the other hand, Chapter 13 bankruptcy is an option for people who make more but still suffer from insurmountable debt. Chapter 13 bankruptcy filings remain on a credit report for seven years. The filer must get court permission to take out additional credit during their repayment period, which can last for three to five years. Someone who files for Chapter 13 bankruptcy can often retain their property and assets.

People can begin to rebuild their credit even while recovering from bankruptcy. An attorney can provide advice and guidance on filing for personal bankruptcy to seek debt relief and moving forward to rebuild a financial future.

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