Bankruptcy and credit repair 

Now there is a scary word. Those who have claimed the b-word never want to do it again. Those who haven’t tremble at the thought. It is a terrible situation to find yourself in and can be devastating to your life, your family and even your job.

The important thing to remember is that even bankruptcy is not forever. It will eventually pass, and you will eventually be able to move beyond it. It will take time, but you can rebuild your credit after the a-bomb of bankruptcy hits it.

AND the good news is, with sound credit repair strategies you can have your credit score repaired and drastically improved in no time.

Chapter 7 Bankruptcy

Personal bankruptcy is a brutal process, with Chapter 7 it can feel as though you have hit rock bottom. This form of bankruptcy involves the liquidation of all assets that are not exempt, those exempt items being decided by the courts.

The debts will be cleared although the sale of property, vehicles and even sometimes personal belongings like furniture will used against your debt.

This recovery from overwhelming debt will stay on your credit report for a whopping ten years and can prevent you for securing any loans, mortgages or other forms of credit. Unfortunately sometimes it is the only option.  

Chapter 7 will not cover delinquent child support, alimony, back taxes under three years or some student loans. You will still have lawyer and court fees to pay for as well as the fees by your court appointed trustee. 

Chapter 11 Bankruptcy

This type of bankruptcy is designated more regularly for business debt. Small businesses can continue to carry on their business practices under a new restructured plan.

This can ultimately make the business more efficient. The repayment of debts comes from the profits made under the new money management strategy and any sales of property or assets belonging to the business.

Chapter 13 Bankruptcy

This form of Bankruptcy is more like a court approved payment plan. It usually only stays on your credit report for seven years instead of the ten years it takes for a Chapter 7 bankruptcy to clear.

This type of debt repair allows you to keep some of your assets like property or vehicles and is set up to slowly pay back your creditors over the course of three to five years. Some of your debt may be forgiven but most of it will be paid back through a court approved plan.

The factors deciding what percentage of your debt will be repaid are you income and how much debt has been acquired. A court appointed trustee will oversee the repayment by receiving payments from you and the distributing them to different creditors who you owe. Not everyone can qualify for Chapter 13.

You must have a maximum of $250,000 in unsecured debt and $750,000 in secured debt. This option is hard on your credit score and will mean higher interest rates on any new credit you open in the future. It is also expensive as it involves court and lawyer fees as well as the fee of the trustee working on your payment distribution. They may take up to eight percent of the amount you have filed.