The causes of debt problems are as varied as the people who experience them. Job loss and unexpected medical bills are frequent factors. You may be considering bankruptcy as an option. Whether filed as a Chapter 7 liquidation or a Chapter 13 repayment plan, a bankruptcy case will be completed upon the issuance of a discharge. The court order will eliminate your legal liability to repay many and possibly all of your debts.
Once you have obtained a Chapter 7 discharge, you may be able to start work almost immediately on rebuilding your credit.
How long does Chapter 7 bankruptcy take?
The first thing you need to know is that the choice of whether to file a Chapter 7 or Chapter 13 petition is not yours alone to make. To qualify for Chapter 7 relief you must show that you do not have the financial ability to repay any significant part of your debts. A so-called “means test” can determine this by looking into your income. Our bankruptcy lawyers can help you complete the means test to see whether you are eligible to file under Chapter 7.
Even if you are an eligible Chapter 7 filer, you must participate in credit counseling before you file. Once this is completed, on average it takes between three and four months from the filing of a Chapter 7 petition and the grant of a discharge. Naturally, each case is somewhat unique and may take longer. This may happen, for example, if any of your creditors object to your receiving a discharge.
How long will a bankruptcy remain on my credit report?
There is no question that a bankruptcy will have a negative impact on your credit. While the precise impact on your all-important credit score cannot be predicted, declines of 200 points or more following a filing are not uncommon.
By the same token, the very fact that you filed for bankruptcy protection means you probably already have seriously delinquent accounts or accounts in collection. This history will obviously harm your credit rating and score, sometimes more severely than a bankruptcy.
The fact that you filed a Chapter 7 bankruptcy will usually stay on your credit report for ten years. However, all history associated with your debts, such as indications that they were charged off as uncollectable, must be removed after only seven years.
Obtaining and rebuilding credit after bankruptcy.
Contrary to popular belief, it is not impossible to obtain credit following a bankruptcy. Indeed, many of our clients who have successfully completed a Chapter 7 bankruptcy are surprised to find themselves receiving offers for new credit cards or other credit soon after.
While accepting one of these offers can be a way to begin rebuilding your credit, many come with very low limits as well as higher interest rates and fees, most of which are not limited by state or federal law. Be sure you read and understand all of the account’s terms and conditions before you accept an offer.
Another alternative is a secured credit card account, which requires you to deposit a certain amount of money in the issuing bank. This deposit works, in effect, as collateral for repayment. Again, however, rates may be fairly high and you do lose the ability to access the amount of cash deposited so long as the account is open.
Needless to say, if you do obtain new credit, it is absolutely critical that you make your full payment every month. For credit cards or other revolving accounts, only borrow what you can repay in full before interest begins to accrue.
Make (and follow) a budget to avoid a repeat in the future
The credit counseling you go through as a condition of filing for bankruptcy can be extremely valuable in helping you review your income and spending. With the help of a trained counselor, make and following a realistic budget for your life post-discharge. Think very carefully before buying any item on credit if you can’t afford to pay for it in cash.
Experienced Bankruptcy Lawyers in Riverside, California
The U.S. Bankruptcy Court for the Central District of California is organized into five districts. The Riverside Division serves Riverside County, in which the principal offices of Tran Bankruptcy Law are located. However, we assist individuals in most areas of the adjoining counties as well.
Call (951) 468-0633 today to reach our Riverside office.
NOTE: This is for informational purposes only and does not constitute legal advice.