How Chapter 7 & 13 Bankruptcies will affect your Credit Score.

By: Mike Clover

Your Credit Score will be affected whether you file Chapter 7 or Chapter 13. But which is worse on your Credit? In this article I will discuss the Pros and Cons in regards to how each bankruptcy will affect your personal credit rating. Over the years in the Mortgage Industry I have dealt with the affects of these different bankruptcies, and how each one affected your ability to get financed. I know that each has its purpose, but I do know which one I would not file personally.

A chapter 13 bankruptcy is where the lawyer gets most of your debts consolidated into a payment you can afford. You make these payments to a trustee for a period of time. This particular bankruptcy is the one I would prefer over Chapter 7. One of the main reasons is the lenders look at Chapter 13 less harshly than a Chapter 7.

The main reason is you are attempting to pay back your debts. You can get a mortgage if you are in a Chapter 13. You cannot get a mortgage if you filed Chapter 7 for usually 2 years. Chapter 13 stays on your credit report for 7 years. A chapter 7 stays on your credit report for 10 years. So you can begin to see how a Chapter 7 is going to affect your credit rating vs. Chapter 13. Typically Chapter 7 sounds like the better way to go, but think twice before you file. Once you make your decision, the last thing you want to do is have regret, because of the credit impact each one has.

Chapter 7 is where you wipe out all debt and there are no requirements to pay back your debts what so ever. There are big repercussions to your credit score when you file Chapter 7. Chapter 7 is the ultimate death of your personal credit. This particular bankruptcy stays on your credit for 10 years. There are certain situations where you must file Chapter 7. but if you don't have to file chapter 7 don't. This bankruptcy takes more time to recover from, and lenders don't like seeing it on your credit report. Typically it is easier to re-establish your credit with Chapter 13 vs Chapter 7. So I think you get the picture how your credit is affected either way. It is always better to pay your debts back if you can, and not file Bankruptcy at all. Just remember your Credit is your life.

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