If you are having financial problems due to the economy, loss of a job, the value of your home is less than what is owed, consider bankruptcy.  Will bankruptcy lower your credit rating?  It depends, people who resort to bankruptcy are having problems paying their bills which means late payments are already effecting their credit rating.  Does it mean you will not be able to get credit?  No, it means you will pay more interest to borrow money.  How long will a bankruptcy remain on my credit report?  7-10 years.

There are a number of Chapters to file under.  However, only Chapter 7 and 13 will be discussed briefly.  Filing under Chapter 7 of the Bankrupcy Code is typically used for consummer debts such as credit cards, car loans, medical bills etc.  A Chapter 7 filing allows all the debts to be wiped out including a mortgage if there is one.  The consummer gets a new start.

Filing under Chapter 13 of the code is more complicated.  It can help you save your house since this does not allow you to wipe out all of your debts.  The consummer must present a plan to the trustee.   The plan must show that the consummer can repay part of the debts in order for the Trustee to accept the plan.  Please note that filing under Chapter 13 will not necessarily save your home.  The ability to save your home is case sensitive.  The repayment period is 3-5 years on a Chapter 13 case.

This Article is provided for general information only.  It does not constitute legal advice.  Nor does it give rise to an attorney client relationship.

Fabiola Jean-Gilles, Esq.