The decision to file for chapter 13 to fix credit can be a difficult one for people who want to do more than pay down their debts. However, the decision shouldn't be a hard one because chapter 13 can fix credit. Once people have good credit, they can obtain better interest rates and loans.
People must remember that if there at the point of considering personal bankruptcy any and all missed payments, charged-off accounts, high balances and collection accounts have already tanked their credit score. Thus, chapter 13 can fix credit scores. For some individuals there may be a slight boost in their credit scores after filing bankruptcy according to Smart Money.
When people declare personal bankruptcy, their credit reports are wiped clean. In other words, the late payments, unpaid accounts and high balances are removed from the negative column of the credit reports. Instead, they are labeled as included in Chapter 13 wage earner plan, according to Smart Money. With negative information removed from individuals credit reports, their credit scores will likely receive a jump, but won't fall any lower.
Debt management options are often used to avoid filing bankruptcy. However, they won't fix credit as quick as chapter 13 may. Let's take debt consolidation, for example. When people file bankruptcy they can immediately start trying to fix their credit. However, debt consolidation can require people to wait 6 to 8 years to complete the program and fix credit, according to Molleur Law.
Granted, when people file chapter 13, it stay on their credit report for approximately 10 years. However, long term bankruptcy still helps individuals wanting to fix credit. For instance, people's credit score can improve because they aren't compared with the general public. Instead, their scores are compared with other bankruptcy filers. Thus, their scores won't tank because they're compared to people with excellent credits scores and no bankruptcies listed.
Bankruptcy lawyers are experienced in how chapter 13 and fixing credit. Thus, they can help people still hesitant about filing bankruptcy. For instance, they will explain in detail the bankruptcy process and people should expect.