It’s no secret that filing chapter 13 bankruptcy with an attorney is seen as a last resort for many people, and it’s not exactly an ideal situation for anyone.
As nice as it would be if this wasn’t the case, filing bankruptcy does create a negative mark on your credit, so we can’t say there are no consequences. However, there are a number of reasons why working with a Chapter 13 bankruptcy lawyer can actually end up being a net positive on your credit.
Read on and see if filing chapter 13 bankruptcy might be the best option for your financial future! Here are a few things to consider.
Filing Chapter 13 Bankruptcy Stops the “Bleeding”
Realistically, if you’re in a position to be thinking about working with a chapter 13 bankruptcy lawyer, it’s most likely because you’re dealing with debts that you’re having a difficult time keeping up with.
If that’s the case, your credit score is probably already damaged. And if you don’t have any end in sight, or a plan in place to handle those debts long-term, it’s not going to magically get better.
If you do have a clear path forward – an increase in income, manageable payment arrangements with your creditors, or a refinancing option that makes sense with your budget, for instance – then maybe you don’t need to go as far as filing chapter 13 bankruptcy.
But if your best option right now is just “buying time,” trying to delay collection or repossession efforts and simply hoping for a miracle, you’re not actually improving your credit. You’re keeping it in a steady decline, and that means it’s going to take that much longer before you can rebound.
Working with a chapter 13 bankruptcy attorney will help you find that clear path forward. Yes, for a while, it will damage your credit. But it also lets you stop the bleeding so you can start climbing back up, instead of remaining in a slow downward spiral with no clear way out. For many of our clients, their post-bankruptcy credit scores aren’t significantly different from what they were dealing with before.
Chapter 13 Bankruptcy Only Affects Your Credit Temporarily
Working with an attorney for chapter 13 bankruptcy will go on your credit, yes, and it will be a negative mark. You probably already knew that, but what you may not have known is that the negative mark is temporary, and doesn’t stay on your credit report any longer than most other negative credit marks.
After filing chapter 13 bankruptcy, you can expect it to remain on your credit report for seven years, and while seven years may feel like a long time, that also gives you time to rebuild your financial situation slowly.
If you work with a chapter 13 bankruptcy attorney to ensure that your repayment terms are within your ability, then by the time those seven years are up, you can work yourself back to a very healthy financial state.
Furthermore, filing chapter 13 bankruptcy will affect your credit score for significantly less time than a chapter 7 bankruptcy, which remains on your credit for 10 years rather than seven. Find out more about the difference between chapter 7 and chapter 13 bankruptcy.
Chapter 13 Bankruptcy Attorneys Provide Credit Building Blocks
The biggest difference between chapter 7 and chapter 13 bankruptcy is that with chapter 13 bankruptcy, attorneys will work with you to create a repayment plan that works with your budget.
Unlike chapter 7 bankruptcy, which liquidates debts altogether for a “fresh start,” chapter 13 bankruptcy is a structured repayment plan that allows you to settle your debts with terms that are affordable with your budget. This often allows you to keep your assets intact while also helping you get out from under your debts and stopping collection actions that are harassing you and your family like foreclosure and wage garnishment.
However, because you are entering a legally-binding repayment plan by working with a chapter 13 bankruptcy lawyer, keeping up with these payments can actually help rebuild your credit faster. Most creditors see filing chapter 13 bankruptcy as preferable to chapter 7, because you are committing to pay back at least a portion of the debt.
You may very well find it easier to start building your credit again after working with one of our chapter 13 bankruptcy attorneys, than you had before filing.
What you need to know is that filing chapter 13 bankruptcy isn’t the end of the world – it’s the beginning of your brighter financial future.
If you’ve been trying to figure out what you’re going to do to get out from under your debts, and it feels like there’s no way out, contact Sheppard Law for a free consultation, and find out what your options are. There is a way forward, and we are here to help you find it.