Does going through credit counseling affect my credit?
Going through credit counseling will show up on your credit report. How that is interpreted by potential creditors may vary according the services that you receive from the credit counseling agency. If you receive help with financial planning or creating a budget, this generally will not affect your credit report. However, if you participate in a debt repayment plan, a note will be placed on your credit report until you have paid off that debt. Debt repayment plans generally involve a credit counseling agency contacting your creditors to reduce interest rates so that you can repay your debts in full. In addition, if you participate in debt settlement services, where your creditors are asked to reduce the amount of debt you owe, this will be noted on your credit report and remain there for seven years. These types of services and programs are generally considered negative attributes on your credit report and may even be considered worse than bankruptcy by some creditors. If you have questions about how to deal with your debt, it is a good idea to consult a bankruptcy attorney before making any decisions that may inadvertently impact your credit report negatively.
Can I protect my house, car and other types of property if I file for bankruptcy?
Depending on the type of bankruptcy you file and the amount of exemptions you are allowed, you may be able to protect your property if you file for bankruptcy. If you file Chapter 13 bankruptcy (see What is Chapter 13 Bankruptcy?), you usually maintain your property as this type of bankruptcy allows you pay back all or some of the debt you owe without liquidating your assets. If, however, you file Chapter 7 bankruptcy (see What is Chapter 7 Bankruptcy?), your property may be seized as part of the liquidation to pay back creditors. There are exemptions for property that you are allowed to retain through a bankruptcy and these exemptions vary for each state. Therefore, it is important to discuss the ramifications of filing for bankruptcy with an experienced bankruptcy attorney in your state. He or she should be able to tell you how and if you may protect certain assets if you file for bankruptcy.
Should I close my credit card accounts?
Many people in financial turmoil are tempted to close their credit card accounts to eliminate the temptation to accumulate more debt. Keep in mind that the history attached to your credit card accounts will remain on your credit report even after you close them. Also, closing accounts will reduce your available credit, thus increasing the percentage of debt you have. Even though you have not taken out more debt, by reducing your available credit, you are decreasing the gap between how much debt you have and how much credit you still have available. The closer your debt comes to your available credit, the more difficult it becomes to get a loan. It is better to cut up credit cards and stop using them than to close accounts permanently. If you do think it is best to close some of your credit card accounts, close newer accounts since older accounts demonstrate a long credit history—something lenders like. Also, make sure your credit report shows that you closed the accounts and they were not closed by your creditors.
How long will filing for bankruptcy affect my credit?
Negative information will appear on your credit report for at least 7 years. This includes, missed payments and even Chapter 13 bankruptcy. If you file for Chapter 7 bankruptcy, it will remain on your credit report for 10 years. While this negative information will remain on your credit report for a number of years, it is difficult to tell how long that will actually affect your credit. If, after filing for bankruptcy, you establish a good reputation as a responsible debtor, it is possible that creditors may be more willing to offer you credit at reasonable rates when they see that you are able to repay debt. If you are filing for bankruptcy, it is important that you talk to your bankruptcy attorney about how bankruptcy will affect your credit and how you can start to rebuild your credit (see Credit Repair After Bankruptcy and Hiring an Attorney to Help Repair My Credit).
Should I file for bankruptcy?
The decision to file for bankruptcy is not something that should be taken lightly. Bankruptcy has the potential to impact your life for years to come and in ways that you may not expect. Remember, bankruptcy does not give you a fresh start when it comes to credit. What is does is allow you either pay back or discharge the debt you’ve incurred so that you can slowly start to rebuild your credit. Rebuilding your credit takes time (see Credit Repair After Bankruptcy) and you may have to live a significant amount of time without credit or with high interest rates for credit before you are able to secure future debt at reasonable rates. Even if you think that there is no hope for your financial situation and bankruptcy is your only option, it is important that you consult a bankruptcy attorney before making any decisions. A bankruptcy attorney should be able to help you determine if, in fact, you really need to file for bankruptcy or if there is another solution that can get you out of debt.