Many people think that filing bankruptcy will erase their bad credit and allow them to start over with a clean slate; however, this is not the case. What bankruptcy does is free you from having to pay back the debt you have accumulated. In some cases, a portion may still need to be paid, but this depends on the type of bankruptcy you file.
Types of Bankruptcy
There are two basic types of personal bankruptcy: Chapter 7 and Chapter 13. Chapter 7 bankruptcy allows you to discharge your debts; however, your household income must be below the median for your area. Chapter 13 bankruptcy allows you to set up a payment plan through the court so that you can pay off your debts within three to five years. Both methods require complex paperwork that usually requires an attorney.
Effects of Bankruptcy
Bankruptcy is one of the most negative things that can appear on your credit report. It basically states that you are unable to repay the remainder of your debts. For this reason creditors will see you as a poor candidate for future loans, making it unlikely that you will be extended a line of credit as long as it appears on your report. It does give you the opportunity for a fresh start, but the many problems caused make it a difficult road.
How Bankruptcy Accounts Appear on your Report
All accounts included in a bankruptcy filing will continue to appear on your credit report. It will also show the account history. The main difference is that they will be shown as part of the bankruptcy declaration. They are listed in this manner because people often have active accounts that are not included when bankruptcy is declared.
Bankruptcy Removal
Bankruptcies cannot be deleted early. They are automatically removed by credit reporting agencies when the time comes. The agencies keep track of Chapter 7 bankruptcies for 10 years. Chapter 13 bankruptcies are only kept on file for seven years. Calling creditors will not facilitate early removal as accurate information is not removed from your report.
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