Are you experiencing financial problems? If so, you may have started to consider bankruptcy. Before you file for Chapter 7 or Chapter 13, make sure you understand how consumer bankruptcy law can affect you.
Greater Debt Reduction
When people file for bankruptcy, they’re normally drowning in debt they can't pay back anytime soon. However, once you file for bankruptcy, you can look forward to a reduction in your debt. Some debt may be completely discharged under consumer bankruptcy law. For example, if you file Chapter 7 bankruptcy, other debts beyond your mortgage may be discharged, which makes it easier to pay your mortgage. Chapter 13 puts you on a strict repayment plan to ensure you pay off your debt over time.
Greater Sense of Relief
One of the key reasons why a person may file for bankruptcy despite its impact on your credit score and the potential reduction in personal assets should you choose to sell any is that it can give you a great sense of relief. Under bankruptcy, you can effectively start over financially, which can be a significant stress reliever for those drowning in debt payments.
Greater Credit Score
Your credit score can impact what you can do with future assets. For example, if you want to own a home, most mortgage lenders prefer a credit score of 620 or higher. When you have a lot of debt, it can make it difficult for you to increase your credit score because that debt is often one of the first things your loan lender sees.
After filing for bankruptcy, you can actually increase your credit score. While it's true that, according to CapitalOne, bankruptcy will stay on your credit for seven to 10 years, after you file it's often the only negative remark on your credit report. This is because your bankruptcy will remove negative items from your credit report, such as student loans, medical debt, etc.
Depending on your financial situation, bankruptcy may be the best solution for you. However, before filing, understand your options and the right type of bankruptcy to file. That's why you should enlist the services of a consumer bankruptcy law professional to help you. If you're considering filing for bankruptcy, contact our legal team at Wiley & Jowers today for assistance.