You can expect consequences to your credit from Chapter 7 bankruptcy. Bankruptcy provides a way for you to get rid of debts, but it may affect your credit in several ways. You should find out these effects before you file, as they can help you decide if you want to file for Chapter 7. Here are three main things you should know how Chapter 7 affects a person's credit.
The Filing Results in a Post on Your Report
As soon as the court receives the case and begins working on it, they will report the case to all the major credit bureaus. The post will state that you filed for Chapter 7 bankruptcy, which will leave a derogatory item on your report. This posting will not drop off your report for ten years, and the ten years starts from the date the court discharges your case. You cannot ask the bureaus to remove it earlier than ten years after.
All Accounts Get Updated on Your Credit File
The second effect you may notice is that filing for Chapter 7 causes an update to all your accounts listed on the report. Each account will state that it was part of a Chapter 7 bankruptcy case. When this occurs, the balances of each account will drop to zero. This posting allows you to have a legal way out of the debt you owe. You should check your credit report after filing to ensure that this occurs.
You Learn Principles to Build Your Credit
The third effect of Chapter 7 on your credit is the ability to learn how to build your credit. Your lawyer will not file your Chapter 7 case until you complete a credit counseling course. After filing your papers, your bankruptcy attorney will instruct you to take a second credit counseling course. Bankruptcy requires both courses, and you can benefit from being required to take these. These courses provide an opportunity for you to learn how to budget, save money, and cut expenses. They also teach you how to rebuild and repair your credit after bankruptcy. If you pay attention during the courses and apply what you learn to your life, you can quickly build your credit after bankruptcy.
If you have questions about bankruptcy and its effects on credit, talk to a local bankruptcy attorney. Your attorney can provide you with the answers you need to decide how to proceed.