Bankruptcy is definitely something to be avoided however, considering the rough economic terrain we have been traversing the last several years, bankruptcy has become very common. Yes, it is detrimental to your credit score and has long lasting effects on your ability to secure financing but it doesn’t have to destroy you. There are laws in place and actionable tactics that anyone can use to lessen the blow and come out in better form than when they went in.
For the average person there are two forms of bankruptcy that they will need to choose from. The major difference being the amount of, and how essential their assets are. A Chapter 7 bankruptcy claim involves the liquidation of all non-exempt assets while a Chapter 13 claim is basically an extension of repayment terms.
By claiming a Chapter 7, everything you own, including your house, car, and even your business will be turned over to a trustee and sold. The money is then turned over to your creditors. If this type of claim is made by someone who does not have a lot of assets to begin with, then they do not stand to lose much. A clean slate is acquired and the only task left is to repair the damage to the credit report.
Claiming a Chapter 13 is much different. This type of claim will buy the debtor time. Three to five years is given in order to catch up on missed payments. This is usually the choice for this of us who cannot part with their non-exempt assets such as their home or business. In order to be eligible the debtor must have a steady, and predictable income which is sizable enough to cover living expenses and pay back their debts on a timely basis.
Once the bankruptcy is in place, it is a wise choice to begin the arduous task of credit reparation. One tool we have for this is bankruptcy loans. Like any bad credit loan these come with high interest rates and strict terms. However, if used properly, paid on time and without incident, they will help counter the negative impact of the bankruptcy on your credit score.
Looking for Something? Search here:
(examples: auto, banking, college, credit cards, debt, frugality, insurance, investing, loans etc.)
