Bryan P. Keenan & Associates, P.C.
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Bryan P. Keenan

Personal bankruptcy and its impact on credit scores

Regardless of the level of debt a Pittsburgh resident has, one of the main obstacles to moving forward with personal bankruptcy is concern about how it will damage credit. This is true whether it is a Chapter 7 bankruptcy in which there is a liquidation of the person's assets; or a Chapter 13 bankruptcy where a payment plan is initiated and the person makes reasonable payments that he or she can afford, generally over a five-year period.

This is an understandable worry and it is important to think about how the credit reports will be affected. Often, people find that the positives of a bankruptcy far outweigh the negatives such as credit issues.

When there is a bankruptcy filing, it remains on the person's credit report for as much as 10 years. As time passes, the negative impact on the credit score will reduce if the person does not get into financial trouble again. It is wise to know the difference between Chapter 7 and Chapter 13 when it comes to credit scores. Chapter 7 will clear most unsecured debts completely. That includes medical debt, credit cards and loans. When debt is cleared through Chapter 7, it will be on the credit report. Being eligible for Chapter 7 hinges on several factors including the means test and how much the person owns and earns. For those without much to retain, Chapter 7 is frequently viewed as the preferable option to eliminate the debt and move on with the negative credit report an acceptable trade-off.

For people who earn income, have a home, a vehicle or other property they want to keep, Chapter 13 is a viable alternative. The Chapter 13 bankruptcy filing will remain on the credit report for seven years. To get a loan while the bankruptcy is ongoing, it must be approved by the court. Once the repayment plan is completed, the debts are gone. A benefit is that people can keep property they do not want to surrender as they would in a Chapter 7.

Keeping track of credit reports can be important as it is possible to spot mistakes and have them removed, possibly improving the credit score along the way. For those who are in overwhelming debt, are unsure of what to do about it and are fearful of the credit report after a bankruptcy, discussing the case with a lawyer experienced in Chapter 7 and Chapter 13 bankruptcy can provide information and possibly alleviate those fears. Calling for a consultation may be useful to making an informed decision.

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Bryan P. Keenan & Associates, P.C.

993 Greentree Road
Suite 101
Pittsburgh, PA 15220

Phone: 412-923-4941
Fax: 412-444-0158
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