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Bankruptcy May Actually Help Your Credit Score

Meta Title: Bankruptcy May Actually Help Your Credit Score

Meta Description: Wondering how filing for bankruptcy could help your credit score? You’d be surprised!

Keywords: Filing for bankruptcy, credit score

Bankruptcy May Actually Help Your Credit Score

Bankruptcy laws were formed to help relieve you from creditors by giving you a fresh start to your finances. While there is no denying that this fresh start comes at the cost of a significant hit to your credit, bankruptcy does have some good long- and short-term effects on your credit.

Depending on your credit score, assets, and current financial situation, you can benefit from bankruptcy.

What is a Credit Score?

To put it simply, a credit score is a number that portrays your credit history and decides whether or not you will falter on a debt. Lenders view this score whenever you ask for debt so that they can decide whether or not they want to give you a loan and what interest rate they want to charge.

The most common type of credit score is FICO scores. These can fall anywhere between 300 to 850. A FICO score depends on the information present in your credit report. This includes:

  • Your history of debt repayment
  • The debt you currently have lined up, including your debt-to-credit ratio
  • Different types of credit that you might have obtained
  • The amount of time you have had credit for
  • Whether or not you have new credit that needs to be paid.

A high FICO score is an indication that you are good at managing your finances. However, a subpar FICO score shows that you are negligent with your credit payments, have a number of unpaid debts in line, have recently gone through a foreclosure, have filed for bankruptcy, or experienced other issues in the process of repaying debt.

How Filing for Bankruptcy May Help Your Credit Score

Getting Rid of Delinquent Accounts

There’s nothing worse than making late payments, as these will wreck your credit score. However, filing for bankruptcy will help remove a large percentage of the delinquent accounts that you may have on your credit report.

This means that once you discharge these debts, they do not read as delinquent on your credit report. Instead, they appear as “discharged.”

Changing the Debt-to-Credit Ratio

An individual’s debt-to-income ratio is regularly considered by credit bureaus. This is why if you have more debt as compared to the amount you earn, your credit score will most likely be low.

However, if you manage to remove some of your debt by filing for bankruptcy, your income will stay the same, and your creditworthiness has good chances of improving.

Allow Yourself to Start Fresh

Debt can be crippling. It can make people feel trapped and suffocated, especially if your debt has reached an unmanageable amount, and your income does not match anywhere close to it. During these times, instead of letting yourself drown in hopelessness, it is essential to realize that filing for bankruptcy may actually give you a fresh start.

Once you get a fresh start, you can start regulating your spending and pay close attention to finding ways to improve your credit score.

By taking advantage of bankruptcy protection in your city, you may start to notice an improvement in your credit score. To find out more about Chapter 7 and Chapter 11 bankruptcy, click here (insert link of the website).

Bankruptcy Forms and What You Need to Know About Them

Filing for bankruptcy can be an arduous process. It is complicated in its technicality and can be confusing in certain places. It would help if you had assistance, whether or not you are recording under Chapters 7 or 13.

Official US court sites give the official documentation for filing, which are printable and can be completed. You likewise may have to follow explicit prerequisites forced through the bankruptcy dealer of your general vicinity, which may include additional or different files. The dealer agent or a lawyer can clarify these prerequisites and instruct you on what is necessary. Sometimes, the court’s site will give the forms, too.

Form Submission

Bankruptcies and their proceedings are documented in federal courts only. All of the US states have at least one government legal locale. You should record in the locale of your main living place or where you’ve lived in for the 180 days preceding your document. (By and large, it is going to be a similar region). Business proprietors have a little extra alternatives to consider.

Forms of C7

Form b 101

The primary file in a C7 bankruptcy is the B 101, or the deliberate appeal. This will give you distinguishing information, notwithstanding information about previous forms, the end of your credit guidance, and other fundamental issues. If there’s an oust not in your favor, you should look into B 101A along with B 101B. On the off chance that you can’t pay the recording expense, you can request for payment of charge in portions from B 103A, else request a renunciationfor B 103B.

Form b 106

B 106 plus connected forms will give a rundown (or “timetable”) of your resources plus debts.B 106A and Bare meant for giving a timetable that deals with your holdings, B 106C is to give a timetable of your guaranteed exclusions, B 106D is to enlist and ensure correct lenders, B 106E or F are to enlist unstable banks, while B 106G is to enlist actionable deals yet-to-expire leases. Then,B 106H is to give the details belonging to partner account holders on your obligations, who should pay on the off chance that you don’t pay your obligations. B 106I deals with pay, while B 106J deals with month to month costs.

Form B 107 and Others

B 107 gives your Affairs Statement, that delineates, for example, your all-out pay in the course of the most recent two years, late installments to banks, continuous claims, ongoing property moves, plus assets of others in your temporary possession. B 108 is Intent Statementof your dealing with these with your obligations and yet-to-expire deals. B 121 social security details belonging to you. Forms B 122A-1 and B 122A-2 identify with the methods trial for the 7th Chapter qualification. They turn out your current month to month revenue and depict whether you need atest if your pay is more noteworthy than average.

Chapter 13 forms

The forms that an indebted person needs to document in 13relate as fairly comparable. B 101, B 101A and 101B plus B 106 along with others connected handle the very issues as 7. When recording for 13,the option to pay the documenting forgoing waivers is there, soB 103A plus 103B won’t assume a job. You won’t have to finish B 108 in 13. So, first finish B 121 to cater to Social Security details.

Chapter 13-Specific Forms

The filings explicit to 13 are B 122C-1 plus B 122C-2.B 122C-1 turns out your current month to month revenue and sets out the period in which you hope to finish your reimbursement.B 122C-2 turns out your dispensable revenue, which includes the assets utilized to issue installments under the arrangement. Notwithstanding the filings, present a different proposition for your reimbursement. It’s certifiably not a particular form and doesn’t follow a specific format; however, you can get some information regarding everything needed to be remembered for the arrangement.

A Record Low in Bankruptcy Filings

Despite the economic uncertainty brought by the pandemic this year, paradoxically, the number of bankruptcy filings in the country hit a new 14-year record low this November. According to data released by the legal giant, Epiq, new bankruptcy filings across all chapters for the month was 34,440, the lowest since January 2006.

According to Deirdre O’Conner, Epiq’s managing director of corporate restructuring, the economic uncertainty itself is to blame for the unusually low filing count.

“These historic low bankruptcy filings reflect the overall uncertainty about our economic recovery. Bankruptcy is a legal tool to restructure, but in this unknown financial environment, the benefit from seeking bankruptcy protection is unclear for individuals, families, and even large companies,” – Deirdre O’Conner.

In addition, government intervention may have also partly contributed to the fall in bankruptcy filings. The various COVID-19 related government programs and state eviction moratoriums are lessening individual incentives for filing for bankruptcy.

Individual bankruptcy filings through the year as a whole have been low. Compared to 2019 for the same period, in 2020, non-commercial filings under Chapter 7 were down 21%, from 414,625 to 325,716, and in the case of non-commercial filings under Chapter 13, the tally was down by 45%, from 252,660 to 137,764.

Source: Globe Newswire

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