Bankruptcy, How it Affects your Credit and your Credit Score

Did you know? Bankruptcy can put a big stain on your credit report for up to 10 years. This impact on your credit report is one of the biggest fears people have when going through a bankruptcy.

Bankruptcy

The flip side of the coin is this... Whether you go through bankruptcy or allow your debts to go to collections, BOTH will impact your credit negatively.

What is Bankruptcy?

Bankruptcy is a procedure you can go through in a federal bankruptcy court that allows you to discharge all or a portion of your debt...

From Wikipedia: Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay their creditors.

A declared state of bankruptcy can be requested by creditors in an effort to recoup a portion of what they are owed; however, in the overwhelming majority of cases, the bankruptcy is initiated by the bankrupt individual or organization.

There Two types of bankruptcies are available to consumers:

a) Chapter 7 bankruptcy

b) Chapter 13 bankruptcy

Chapter 7 bankruptcy, also known as liquidation bankruptcy, let the debtor discharge all of his or her debts.

Chapter 13 bankruptcy, also known as reorganization bankruptcy, allows the debtor to keep most assets and to arrange for partial or full payment of the debts owed over three to five years.

Bankruptcy Benefits

One of the most important and beneficial things about bankruptcy is that the minute you file your petition with the court stating that you are asking to be declared bankrupt, all of your creditors are stopped from any collection attempts. This is called an automatic stay.

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