How Does Bankruptcy Affect Your Credit Score
The primary issue that discourages quite a few individuals from filing for bankruptcy is the negative effect it can have on a credit score. It is true bankruptcy in Texas can remain on your credit report for up to 10 years, which can seriously impact your credit rating. However, if you don’t file for bankruptcy and allow your debts to go into collections, this will also impact your credit negatively.
Chapter 7 or Chapter 13?
The type of bankruptcy that you file, Chapter 7 or Chapter 13, is going to determine how much it affects your credit rating. You can discuss the pros and cons of each type with your credit card bankruptcy lawyers, who will be able to help you better understand the impact each of these filings will have.
You may initially see a decrease on your credit rating, but the main remedy for this is time. There are other steps you can take to help and positively enhance your credit score. Over time, if you are responsibly managing your new debts, your score will increase, which means you will gradually be able to recover your financial health. In most cases, hiring a Chapter 13 or Chapter 7 attorney for help will be beneficial.
Chapter 13 Bankruptcy Specifics
The bankruptcy, as well as the debts related to the bankruptcy filing are going to all be shown differently on your actual credit report. Once complete, a Chapter 13 bankruptcy is going to remain on your report for a period of seven years, and the discharged debts will stay on your report for a period of seven years after they have been discharged. Because there are many debts that will remain active during a Chapter 13 bankruptcy until the end of the three to five year payment plan, the debts being discharged may remain on the report longer than the bankruptcy.
Chapter 7 Bankruptcy Specifics
After the Chapter 7 bankruptcy in Texas is complete, it is going to remain on your credit report for a period of 10 years because all of the debts related to the Chapter 7 filing are discharged after just a few months. This means they will drop off of the report a few years before the bankruptcy itself does. In most cases, a discharged debt is going to drop off of a report after a period of seven years.
Put simply, the items on your credit report related to the bankruptcy will get older, and as a result, they will not impact the rating as much. You may want to hire a Chapter 13 or Chapter 7 attorney to help with your situation. If you are ready to get started, contact us, the sooner the better!