Many Americans who seek debt relief do so because they got into financial trouble with credit. Mortgages, credit card bills and other debts can pile up, quickly gathering interest. An unexpected setback, such as a medical emergency or loss of a job, can make these debts impossible to overcome without help. Fortunately, a professional can help people get out of this kind of financial trap through debt relief methods such as Chapter 7 and Chapter 13 bankruptcy.
But none of this means that credit itself is bad, or to be avoided at all costs. In fact, credit is a necessary part of life for many people, especially if they need to buy a car or a home.
So, how does filing for bankruptcy affect a person’s credit score?
When giving a consumer a score, credit agencies look at several factors, including how much debt the person carries, and how many times the person has missed a payment. After filing for bankruptcy, a person’s credit score may go up because the amount of outstanding debt has been reduced.
However, lenders want some assurances that the consumer will be able to handle debt after a bankruptcy. Therefore, it is important to follow all the requirements that come with personal bankruptcy.
Still, if you have filed for personal bankruptcy, it is important to know that credit agencies must list this fact for a period of time. A Chapter 7 bankruptcy will stay on your credit report for 10 years. A Chapter 13 bankruptcy will stay for seven years.
There are many things to consider when you are trying to get out of debt. A lawyer with experience in debt relief can advise you on your options and help you through the process that can return you to financial health.