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Saturday, January 2, 2010

Do you know Chapter 7 bankruptcy scars your credit rating?

It is believed that filing Chapter 7 bankruptcy allows you to make a fresh start. Does this really happen? Filing bankruptcy may allow you to make a fresh start but it has its own complications too. The number of consumers filing Chapter 7 bankruptcy has increased in number. More and more people are not being able to make payment for their bills. In fact there is a vicious cycle. People are losing their jobs as a result of which they are not being able to fulfill monthly financial obligations.

Whether you file Chapter 13 or Chapter 7 bankruptcy, it gets recorded in your credit report for a period of 7 to 10 years. So, it is best to stay away from bankruptcy as much as possible and try out different bankruptcy alternatives. The bankruptcy alternatives include debt consolidation, debt settlement, debt management etc.

Although filing bankruptcy gives you a fresh start but there is lot you have to compromise with as far as enjoying financial benefits are concerned. Let us see what price you have to pay if you file Chapter 13 or Chapter 7 bankruptcy.
Your credit rating nosedives
When you file “liquidation” bankruptcy (where your non-exempt assets are liquidated to pay off creditors) your credit rating nosedives miserably. This is true for any type of bankruptcy you file. And it is a well known fact that your credit report is a “financial report card” and whatever you do financially gets recorded in the credit report.
You may not get a suitable job
There are many employers that don’t hire you if they find bankruptcy filing in your credit report.
A homeowner may not rent out his premise to you
Filing bankruptcy may act as a hindrance when you want to shift to a rented place. If the homeowner finds out that you have filed bankruptcy, he may not rent out his apartment to you.
You need to deposit for utilities
If you are requesting for a new service such as home phone, gas, electricity, cell phone, internet or cable TV, you have to pay deposit for the same since you will be treated as “risky” as you have bankruptcy in your credit report.
You will not get good credit
Whether you file Chapter 13 or Chapter 7 bankruptcy, it will take a long time before you can finally win back a lender’s confidence and get fresh credit again.

So, whether you file Chapter 13 or Chapter 7 bankruptcy, both impact your credit rating in a similar manner. While Chapter 7 bankruptcy remains in your credit report for a period of 10 years, Chapter 13 will haunt you for 7 years.


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