Michael D. Hart, P.C.

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How a bankruptcy impacts a debtor

| Mar 21, 2018 | Chapter 13 Bankruptcy |

Those in Virginia who are thinking about filing for bankruptcy should know that the process can do significant damage to a credit score. However, it is possible to minimize the damage over the long-term. By taking out a secured credit card or a credit builder loan, a debtor could start to establish a timely payment history.

The public record of a Chapter 7 bankruptcy will last for 10 years. However, all other bankruptcy references will remain on a credit report for only seven years. Once that time has elapsed, the bankruptcy won’t be seen by anyone doing a credit check. After the seven years, a person’s credit score may improve significantly. With some planning and discipline, however, it is possible to get a good credit score within four or five years.

The extent of the bankruptcy will likely determine how significant an impact it will have on an individual’s credit. A debtor who is discharging several accounts with high balances may have a more negative experience than someone who discharges only a few accounts with low balances. Finally, it is important to remember that a person may not have all of his or her debts discharged in a bankruptcy filing.

By filing for Chapter 13 bankruptcy, a debtor has the opportunity to reorganize secured debts. Debts are repaid according to the terms of an approved plan over the course of three or five years. If there are any remaining balances, they may be discharged at the conclusion of the repayment period. Those who are considering filing for bankruptcy could learn more by talking to an attorney. Creditors may be barred from contacting debtors during a pending case.