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Bankruptcy and its Effect on your Credit Score

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By : Flynna Jones    99 or more times read

When you talk of bankruptcy, it is the most terrible thing that can happen to you. This would also mean that your credit score is extremely low and thus you will have a hard time dealing with lending companies.

Bankruptcy can give you a sign of relief in the sense that collectors will no longer bombard you with calls or follow you wherever you go. Creditors will know that you can not pay your debts anymore.

Bankruptcy has different kinds. The first one would be the Chapter 13 bankruptcy. Others call it reorganization. It will allow you to take hold of your house or your asset. This will let you pay or settle your dues within 3-5 years, instead of just surrendering it to the bank or lender. There will be a notification coming from the court informing the lenders to stop following you up for the payment. They are given 15 days to do this and so after that, you are free from all those calls and letters. Although this will give you an impression that you are a negligent payer as well as pulling down your credit rating relatively low, but you are also telling the lenders that you still have intentions to pay in the future.

As for the second type, it is called the Chapter 7 bankruptcy. This will require the liquidation of your assets which are not exempted in your region. Those properties which are said to be excluded are the work-related things and standard household fixtures. Other property may be disposed by an officer that is appointed by the court or handed over to the creditors. This type of bankruptcy can be filed only once in every 6 years. This is said to be the meanest of all types of bankruptcy since this will leave a mark on your credit report. Prepare to be disapproved by lenders on your loan application in the future.

Bankruptcy can be on your credit record in 10 years. This means it would be so hard for you to seek financial assistance from credit companies since you will be getting a terribly low credit score. In fact, even getting hired is also another issue if you have a record of bankruptcy. But you do not have to really worry about it because you have the chance to clear up your name and establish your finances again.

The two kinds of bankruptcy explained above both allow you to stay away from unstable debts and free from foreclosure. Though they also have bad effects on your credit standing but they give bearable results than getting totally down. If you are already on the verge of filing bankruptcy, just think that you can still put up your name and finances. Even if it takes time but you can be more responsible and careful on handling your finances the next time.

Do not be discouraged since you can still have the chance to pursue your investment goals. Just be diligent and sincere in paying your dues the next time.
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