How Will Bankruptcy Affect my Credit Score?

credit score reportPeople file bankruptcy when they are unable to manage or pay their debts. Although it might appear as the right decision for your finances, filing for bankruptcy should be the last option for anyone to consider as far as your credit score is concerned.

Declaring yourself as bankrupt shows how poor you are with regard to debt management. It is a decision that can negatively affect your credit score for nay years to come. If you are thinking of filling of filing bankruptcy, then one of the things you should do is to talk to an experienced bankruptcy attorney Baldwin County.

Here are some of the things you need to know about filing bankruptcy:

Bankruptcy is a legal process that involves a borrower and his or her creditors. The process requires you to officially declare that you are unable to pay your debts. This gives you an opportunity to get relief from some or all your existing debts. The process will require you to declare that you can no longer meet your debt obligations.

You should first consult with bankruptcy chapter 7 mobile AL lawyers before making the final decision. This is because filing for bankruptcy should be a last resort after you have exhausted all the available options such as debt consolidation and debt management.

Bankruptcy is a complicated process and that’s why you will need to work closely with AL mobile attorneys to ensure that nothing goes wrong. There are two types of bankruptcy namely; chapter 13 or chapter 7. You will file either of them depending on your financial situation.

Chapter 7 bankruptcy

This type of bankruptcy offers what can be termed as a clean slate. A court trustee is appointed to oversee the sale of some of your assets excluding some like households and cars and give the money acquired to the rightful lenders.

Whatever remains of what you owe will be done away with as soon as the bankruptcy is discharged. Discharge of bankruptcy is an order from the court setting you free from all the debts covered under the proceedings. This means that you will no longer be required to pay the debts to any lender.

Because chapter 7 bankruptcy does away with all your debts, it might appear as an attractive option for many. However, you will be required to take a means test to determine if you are eligible or not. An Alabama bankruptcy lawyer is best placed to advise you on how to take and pass a means test.

Chapter 13 bankruptcy

Unlike chapter 7 bankruptcy that provides a clean slate, chapter 13 bankruptcy can restructure your debts in a manner that makes them more affordable. You can be given at least three or five years to allow you to clear some or all your debts. Your bankruptcy will be discharged once you have completed the repayment plan.

How does filing for bankruptcy affect your credit?

Your payment history is crucial when it comes to determining your credit score. Filing bankruptcy can greatly damage your credit history since you won’t be servicing your covered debts. For example, a chapter seven bankruptcy will be on your credit report for at least 10 years.

Rebuilding your credit

It is still possible to rebuild or repair your credit score even after filing bankruptcy. Other than seeking help from a bankruptcy mobile AL lawyer, you can also hire credit repair companies, start paying your bills on time, stick to a budget or get a secured credit card.

How a lawyer can help

A bankruptcy attorney mobile Alabama is the best person to guide you through the process of filing bankruptcy. Loris Law Firm has some of the best bankruptcy lawyers. Call today for a free consultation.