When considering filing for bankruptcy, one of the key decisions is whether to file for Chapter 7 or Chapter 13. An important factor in this decision is how each type of bankruptcy will affect your credit score. This blog explores how Chapter 13 bankruptcy can impact your credit and provides insights to help you make an informed decision.
How Much Will Chapter 13 Bankruptcy Lower Your Credit Score?
Your credit score is a composite of personal and financial information, reflecting your history of on-time payments, involvement in lawsuits, liens, foreclosures, and bankruptcies. Credit scores generally fall into these categories:
- 720+ Excellent
- 690 – 719 Good
- 630 – 689 Fair
- 629 or less Poor
Filing for Chapter 13 bankruptcy will typically lower your credit score in the short term. The extent of the impact depends on your credit score before filing. You might see a drop of between 130 and 240 points. Generally, the higher your score was before filing, the more significant the drop will be after filing for Chapter 13.
Can You Get a Loan After Filing Chapter 13 Bankruptcy?
Yes, you can still obtain loans after filing for Chapter 13 bankruptcy. Unlike Chapter 7, which is often chosen by debtors with minimal financial resources, Chapter 13 is intended for higher-income debtors who can allocate disposable income to make monthly payments over three to five years. This long-term commitment often appears more favorable to lenders compared to Chapter 7, meaning you may be eligible for loans sooner than you might expect.
Chapter 13 Bankruptcy Won’t Be on Your Credit Report Permanently
A significant consideration is that a Chapter 13 bankruptcy does not stay on your credit report forever. It will remain for a maximum of seven years, starting from the date you file—not from when the case is discharged. Given that Chapter 13 plans take three to five years to complete, it’s crucial that the countdown begins at filing, so the record of your bankruptcy doesn’t linger longer than necessary.
Unsure About Filing? Get a Free Consultation
Deciding whether to file for bankruptcy and which chapter to file can be daunting. If you’re uncertain, it’s essential to seek professional advice. At Law Offices of Terrence Fantauzzi, we offer free bankruptcy consultations to help you understand your options and make the best decision for your financial situation.
Contact us at (909) 552-1238 to schedule your consultation. We’ll evaluate your circumstances and provide expert advice on how to proceed. Don’t let financial stress overwhelm you—reach out to us today for the guidance you need.
By understanding the implications of Chapter 13 bankruptcy on your credit, you can make a more informed decision about your financial future. Let Law Offices of Terrence Fantauzzi assist you in navigating these complexities and help you regain financial stability.