CHAPTER 13 BANKRUPTCY’S EFFECT ON CREDIT SCORES

Chapter 13 Bankruptcy's Effect on Credit Scores in Chicago

Wondering About Credit Repercussions After Chapter 13 Bankruptcy? Curious About How Long it Stays on Your Credit Report?

Chapter 13 Bankruptcy is a way to eliminate unmanageable debt while keeping your assets. It provides a much needed relieve valve for people in Illinois who have high debt levels, but retain a stable income. However, one of the drawbacks of both Chapter 13 and Chapter 7 Bankruptcy (Learn the difference between Chapter 7 and Chapter 13 here) is the effect it has on your credit score.

Chapter 13 Bankruptcy’s Effect on Your Credit Score

Chapter 13 Bankruptcy will typically stay on your credit report for about 10 years, same as Chapter 7. However, some creditors will report a Chapter 13 Bankruptcy for only seven years. The reason for this is that some lenders may see Chapter 13 as a more responsible way to handle your debt than Chapter 7 because you made a good faith effort to repay your debts despite your financial issues.

FICO states the following:

“A bankruptcy will always be considered a very negative event by your FICO® score. How much of an impact it will have on your score will depend on your entire credit profile. For example, someone that had spotless credit and a very high FICO score could expect a huge drop in their score. On the other hand, someone with many negative items already listed on their credit report might only see a modest drop in their score.”

How Will This Affect You?

The Drawbacks: The reality is that lenders will probably be reluctant to lend to you, especially if the bankruptcy is recent. Overall, lenders have become much less tolerant of risk, and bankruptcy is a strong indicator of lending risk. If you’re looking to apply for a for a home loan you might have a lender willing to take a chance on you, depending on how long ago the bankruptcy occurred and how you have managed your credit since. However, you will most likely have to pay much higher interest rates and fees to qualify.
The Benefits: The good thing about clearing your debt is that despite your history, you are theoretically in a good position to take on new debt, which Chicago lenders shouldn’t fail to notice. You’ll need to be very careful and approach taking on new debt cautiously, so that you don’t face the same financial situation again. You’ll also be required to undergo some credit counseling, which will help you get a better understanding of the best ways to maintain financial stability. A Chapter 13 Bankruptcy attorney in Chicago can help you develop a plan to stay out of debt.

Considering a Chapter 13 Bankruptcy Filing in Illinois? Get a Free Consultation Today!

Despite the effect bankruptcy can have on your credit, working towards a debt-free life clearly outweighs a potential dip in credit score for many people. To ensure that the Chapter 13 filing process works correctly, it’s important to seek the advice of a qualified Chapter 13 Bankruptcy attorney in Chicago.

While filing and going through bankruptcy can be complicated and frustrating, the attorneys at Suburban Legal Group PC can help you successfully complete navigate the process and get a fresh, debt-free start.

Request a Free No Obligation Chapter 13 Consultation Today. In this consultation, we’ll meet with you to determine what options exist, and create a road map to help you get out of debt. There are no hidden fees, nor is there any obligation to choose our services after your free consultation. Our goal at Suburban Legal Group PC is to change your financial future, and we provide a reasonable fee and payment plan options that helps you accomplish this.