Chapter 7 Bankruptcy
In Chapter 7 bankruptcy, the debtor sells all non-exempt property to repay as much as possible of their unsecured debt. He is released from the remaining amount of debts. However, this has a significant impact on the creditworthiness of the debtor. You are viewed by creditors as a credit risk. It makes future credit approval extremely difficult. There are few exceptions, such as federal student loans, home loans with a higher interest rate, and mortgaged loans that can be obtained despite a low credit score.
Chapter 13 Bankruptcy
Unlike chapter 7 bankruptcy, chapter 13 bankruptcy allows you to repay all of your debts over a longer period of time. It is designed for individuals with temporary financial difficulties, such as job loss or a large medical bill. Those with a stable monthly income can elect for this option. A chapter 13 bankruptcy has a negative impact on your credit score, but it also demonstrates your willingness and positive outlook to repay your debts rather than evade them. This frequently improves your creditworthiness and enables you to obtain credit within two to three years.
How to rebuild credit following bankruptcy
Filing for bankruptcy is a matter of public record, and it cannot be concealed. Unavoidable are the effects on your credit score as well. However, there are a few options that can make your life simpler after bankruptcy.
In the event of chapter 7 bankruptcy, ensure that your credit report reflects a balance of $0. The creditors should not object to your prospective delinquency on your debts.
Obtain a fresh credit card. A secured credit card can suit the purpose admirably as well. If you can make on-time payments for close to 18 months, you will soon be eligible for an unsecured credit card.
Requesting an acquaintance to add you as a user on his credit card is a further method of establishing credibility with creditors. Your bankruptcy will have no negative impact on your friend's credit score, but the account history of your friend's credit card will positively impact your credit report.
Filing for bankruptcy has long-lasting negative effects on you and your credit report. In addition, you must endure shame and humiliation throughout the entire procedure. It imparts few teachings that last a lifetime. You avoid obligations and financial problems for the remainder of your life and maintain your credit report without making any further errors.""
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