Bankruptcy has proven to be an excellent method to get rid of unmanageable debt. Throughout the years, millions of people around the U.S. have witnessed the benefits bankruptcy can bring into their lives. However, there is still confusion and fear surrounding the word “bankruptcy.” How does bankruptcy work and how much time will a discharge remain on your credit report? Our California bankruptcy attorneys at The Bankruptcy Group invite you to keep reading as we answer these critical questions.
Will a Bankruptcy Discharge Remain on My Credit History for Long?
As you may be aware, your credit score is essential for most of the actions involving debt. Keeping a good credit score can help you take advantage of any special offers lenders may have. On the other hand, bad credit can hurt your chances of obtaining things such as a personal or auto loan. Unfortunately, thousands of people live in circumstances where their finances have dealt them a lousy hand, creating all sorts of financial hardship.
As a result of a difficult situation, many people find themselves in a position where they can’t see a way out. For decades, many people have thought bankruptcy to be a bad option because of the alleged social stigma and a lack of options. However, people may be surprised to know bankruptcy can help people have a new financial start once they obtain their bankruptcy discharge.
Once you have obtained your discharge, it will remain on your credit report for a period. The amount of time your discharge will stay on your credit history will depend on the type you filed for.
How Long Will Chapter 7 Bankruptcy Stay on My Credit Report?
Chapter 7 bankruptcy is one of the most common types of consumer bankruptcy. Through it, you can eliminate most or all of your unsecured debt. This means you can get rid of debt stemming from things such as credit cards. The process of Chapter 7 requires you to meet specific criteria. You will not obtain the benefits of Chapter 7 just because you are going through a tough financial situation.
To qualify for Chapter 7, you will need to go through what is known as the means test. The means test will look at your monthly income to determine whether you qualify. Your salary will be compared to your state’s median to reach a final determination. If your income is sufficient to pay your debts based on the means test calculations, you will not qualify. On the other hand, if your income falls below your state’s median income, then you will likely be qualified for Chapter 7.
Once qualified, the court will appoint a trustee who will be in charge of overseeing the complete bankruptcy process. The trustee will be in charge of selling all your non-exempted property and distributing all the proceeds among your creditors. Once the process is over, you will obtain a bankruptcy discharge.
Your discharge will remain on your record for 10 years. While many people see this as a disadvantage, it can prove to be beneficial down the road. The ten years you will have once your discharge is granted will serve as a stepping stone towards financial recovery.
How Long Will Chapter 13 Bankruptcy Stay on My Credit Report?
Chapter 13, also known as repayment bankruptcy, is designed to help debtors manage substantial debt. Unlike Chapter 7, Chapter 13 does not require a debtor to go through a means test. Instead, debtors must create a repayment plan that can last up to five years. The plan is presented to your creditors, who will need to agree to the plan. Once set in motion, you should make your payments following the terms and conditions included on your repayment plan. Failure to follow through with your repayment’s terms and conditions can hurt your chances of obtaining a discharge.
Once you have paid your debt to your creditors, you will be discharged. Unlike Chapter 7, where your discharge remains for ten years on your report, a Chapter 13 discharge will stay for seven years.
Are There Additional Alternatives to Bankruptcy?
While bankruptcy can provide you with a unique opportunity to get rid of excess debt, there are other ways you can manage your finances. You can explore different alternatives to bankruptcy, which can help you avoid having a discharge on your credit history. For instance, if you have enough disposable income to meet some of your financial obligations, you should consider negotiating with your creditors. Many creditors are willing to negotiate and find common ground to solve your financial situation.
Another option available to you is contacting a credit counseling agency who can help you pay back some of your debt and improve your chances of success. Finally, you can contact a bankruptcy lawyer who understands the law and which options can best set you up for financial success.
California Bankruptcy Attorneys Offering Free Consultations
Dealing with a challenging financial situation can be overwhelming. However, it does not mean you should give up your hopes for a new financial start. At The Bankruptcy Group, we understand how difficult dealing with a financial crisis can be. We dedicate all our efforts to guiding and protecting your rights during the bankruptcy process. To learn more about your specific situation in a free, confidential consultation with one of our California bankruptcy attorneys, call our law offices today at 888-710-4334.