Excessive debt might leave people worrying about their finances, so they look to bankruptcy courts for protection. However, some Connecticut residents might worry about bankruptcy proceedings’ effect on their credit scores. A credit report will reveal whether someone filed for bankruptcy, but that information will disappear from the report in time.
Bankruptcy and credit histories
Most negative items on a credit score, such as a defaulted obligation, remain on a credit score for seven years. Once seven years pass, the information disappears. The same is the case with Chapter 13 bankruptcy. However, with Chapter 7 bankruptcy, the period extends to 10 years. Chapter 7 refers to liquidation bankruptcy, while Chapter 13 involves following through on a payment plan.
Information on a credit report contributes to the numerical ranking known as a credit score. Credit scores indicate someone’s creditworthiness, and a low credit score could hurt a person’s ability to procure financing and other benefits. Bankruptcy will lower a credit score significantly.
Bankruptcy and finances
While bankruptcy causes a credit score to drop, so does missing credit card payments, defaulting on obligations or amassing too much debt. Such things will happen when a debtor cannot control their financial situation. Filing for bankruptcy may help someone deal with untenable money problems and move the individual toward a better fiscal position. Struggling to pay debts month-to-month with no positive end in sight may not be the best approach to dealing with creditors.
When a debtor exits bankruptcy, they have a chance at a fresh start. However, it is essential to avoid the same actions that led the person into bankruptcy in the first place. Filers must attend mandatory credit counseling, which could assist them from repeating their past mistakes.