Bankruptcy and Your Credit

People are often hesitant about filing bankruptcy because of what it will do to their credit. They know that a bankruptcy can stay on your credit report for ten years. They should also consider that being behind in their payments can cause a negative impact on their credit report.

Things like late payments, over the limit balances, default on payments, foreclosures, evictions, repossessions, all stay on your credit report for at least several years. Prospective lenders will not look favorably on these negative marks and would weigh them along with a bankruptcy in terms of credit favorability.

If you are overwhelmed with debt, your credit score may not be the most important thing to worry about right now. If a lender sues you for nonpayment, it may be able to get a court-ordered judgment against you. This can involve a lien on your home or wage garnishment. None of those actions taken against you will help you get out of debt.


Instead of ignoring the calls and letters from creditors, you may want to consider filing bankruptcy. The creditors won’t go away, but bankruptcy can eliminate the legal obligation to pay on much of your debt. Your unsecured debt like credit cards, medical bills, payday loans, past utility bills, and personal loans can all be discharged in as little as four to six months in a Chapter 7 bankruptcy liquidation.

Saving your Home

If you have received notice of an upcoming foreclosure sale, a Chapter 13 bankruptcy may help you keep your home or other secured debt like a car. You can attempt to retain your assets in a Chapter 13 bankruptcy case if you are able to pay the arrears with a court-approved payment plan for three to five years. At the end of the payment period, any remaining unsecured debt will be eliminated.

Getting Credit

If, after bankruptcy, you pay your bills on time for a couple of years and do not acquire more debt, lenders will start to look more favorably on you when you apply for a loan. By avoiding the “No Credit, Bad Credit, Ok” lenders with their high-interest rates and unfavorable terms, you can set yourself up for better credit opportunities in the near future.

If you have more questions about your credit and bankruptcy, contact an Elk Grove bankruptcy attorney today.

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