How Chapter 7 and Chapter 13 Bankruptcies Will Affect your Credit Score

Your Credit Score will be affected whether you file Chapter 7 or Chapter 13. But which is worse? In this article I will discuss the Pros and Cons in regards to how each bankruptcy will affect your personal credit rating. Over the years in the Mortgage Industry I have dealt with the affects of these different bankruptcies, and how each one affected your ability to get financed. I know that each has its purpose, but I do know which Bankruptcy will affect your credit Score more.
A chapter 13 bankruptcy is where the lawyer gets most of your debts consolidated into a payment you can afford. You make these payments to a trustee for a period of time. This particular bankruptcy is the one I would prefer over Chapter 7. One of the main reasons is the lenders look at a 13 less harshly than other bankruptcies. The main reason is you are attempting to pay back your debts. You can get a mortgage if you are in a 13. You cannot get a mortgage if you filed Chapter 7 for usually 2 years.
Chapter 13 stays on your credit report for 7 years. A 7 stays for 10 years. So you can begin to see how a 7 is going to affect your credit rating vs. 13. Typically 7 sounds like the better way to go, but think twice before you file. Once you make your decision, the last thing you want to do is have regret, because of the credit impact each one has.
Chapter 7 is where you wipe out all debt and there are no requirements to pay back your debts what so ever. There are big repercussions to your credit score when you file 7. This particular bankruptcy is the ultimate death of your personal credit. This bankruptcy stays on your credit for 10 years. There are certain situations where you must file a 7.
But if you don't have to file 7 don't. This bankruptcy takes more time to recover from, and lenders don't like seeing it on your credit report. Typically it is easier to re-establish your credit with 13 vs. 7. So I think you get the picture how your credit is affected either way. It is always better to pay your debts back if you can, and not file bankruptcy at all. Just remember your credit is your life.
About the Author: Mike Clover is the owner of http://www.my720fico.com My720fico.com is one of the most unique on-line resources for free credit score reports, Internet identity theft software, secure credit cards, and a BlOG with a wealth of personal credit information. The information within this website is written by professionals that know about credit, and what determines ones credit worthiness.
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