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Filing Bankruptcy May Improve Your Credit Rating

Filing Bankruptcy May Improve Your Credit Rating
"""The majority of my clients believe that declaring bankruptcy will irrevocably ruin their credit score. In reality, the majority of individuals who are contemplating bankruptcy already have a low credit score, and bankruptcy will not significantly lower their score. In fact, declaring bankruptcy may be the initial step in regaining creditworthiness.

There are many factors why a debtor's credit rating may improve after filing Chapter 13 bankruptcy. For instance, Chapter 13 bankruptcy requires the debtor to create a budget and evaluate their spending habits. It is astounding how many people have severe financial problems but never take the time to evaluate their spending habits. Many debtors reduce their monthly expenses after reviewing a written document of their income and budget in the form of their bankruptcy schedules.

Second, bankruptcy permits debtors to reorganize their debts and pay a substantial portion of their creditors via a repayment plan. Typically, a Chapter 13 plan reduces interest rates, lengthens repayment terms, and eliminates debt entirely. The Chapter 13 plan permits debtors to make affordable payments on their debts. Consequently, after filing for bankruptcy, they are able to pay their expenses on time, which is crucial for reestablishing credit. By making timely payments, debtors can begin to increase their credit score. Moreover, a Chapter 13 bankruptcy indicates to creditors that the debtor is attempting to improve their financial situation, as opposed to merely defaulting on their debts.

Additionally, Chapter 7 bankruptcy may enhance a debtor's credit score. Chapter 7 bankruptcy cases last four to five months, after which the majority of the debts of the debtor are discharged. At the time of filing for bankruptcy, the debtor's credit score may temporarily decrease. However, the case is quickly resolved, and the debtor's credit score will quickly recover if they pay their bills on time, keep their job, and do all the other things that improve a credit rating. Generally, filing Chapter 7 bankruptcy will enable debtors to improve their credit rating more quickly than if they allowed their debts to remain unpaid for years.

If your objective is to improve your credit score, you should contemplate declaring bankruptcy. After discharge, credit scores do recover, and many debtors will find that their ability to obtain credit improves.""

" - https://www.affordablecebu.com/
 

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"Filing Bankruptcy May Improve Your Credit Rating" was written by Mary under the Finance / Wealth category. It has been read 127 times and generated 0 comments. The article was created on and updated on 01 June 2023.
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