Chapter 7
Filing for Chapter 7 bankruptcy protection is the act of confirming to a court of law that you are unable to pay your bills and meet any financial obligations you may have. Any non-exempt debts (things like child support, student loans, and spousal support) are then absolved during bankruptcy and you are no longer obligated to pay them. However, any non-exempt assets you have (vacation homes, multiple cars) will be sold and the money raised will go towards paying off some of the debts that are being absolved during the proceedings.
Credit Score Reduction
While filing for Chapter 7 bankruptcy severely hinders your credit score, it does not lower it by any set amount. A Chapter 7 bankruptcy filing will simply be present on your credit report for ten years after the date of filing. This will let any potential lenders know that you were (at least at one time) a severe credit risk. However, as you cannot file for bankruptcy again for eight years after your first bankruptcy, certain lenders may be more likely to extend you credit for this reason. Each lender makes his own decisions on who to grant credit to, so each attempt to get credit after bankruptcy will yield different results depending on the situation.
Life After Bankruptcy
There are a few things you can do to raise your credit score and simply survive after a Chapter 7 bankruptcy filing. For starters, joining a credit union is the most likely place to get new credit after bankruptcy. The goal of a credit union is to help its members in any way possible during times of financial hardship. They can be a good source for car loans. Another way to repair your credit is to get a single credit card to use often. Then, make sure you pay it off every month. After several months, this will be a good way to show that you are capable of paying your bills on time and now have an established history of doing so.
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