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Chapter 13: Is it better for my credit score than Chapter 7?

On Behalf of | Feb 10, 2023 | Debt Relief

Making the decision to seek legal assistance with your debt is a major decision that likely required significant time and consideration. Filing for bankruptcy is not a decision to take lightly as this could affect your future. While it can provide many benefits, there are reasons why you should carefully consider whether this is the best decision for your specific situation before you move forward.

One of the most common concerns Pennsylvania applicants have regarding bankruptcy is the potential effect this can have on their credit score. Your credit will impact what you can do once the bankruptcy process is complete, including buying a car, buying a home and financing other things. You may wonder if Chapter 13 bankruptcy will have a better or worse effect on your credit score than Chapter 7.

Your future after bankruptcy is complete

Chapter 13 bankruptcy is a popular option for certain applicants who have a large amount of secured debt, such as a mortgage or car loan. This is reorganization bankruptcy, which means that your debts will be reorganized into manageable amounts that you will repay over a period of three to five years. Generally speaking, both chapters of bankruptcy will have a negative effect on your credit score. As you consider Chapter 13 and your future after bankruptcy, consider the following:

  • A Chapter 13 bankruptcy filing will stay on your credit for up to seven years.
  • This seven-year period will start only after the repayment process is complete.
  • It is possible that lenders will see Chapter 13 bankruptcy as less favorable than Chapter 7.

Even if it is challenging, there are certain steps you can take that will allow you to rebuild your credit after bankruptcy. While this may seem like a negative aspect of bankruptcy, it is possible that the benefits of this choice far outweigh any potential negative consequences you may have to navigate with your credit score after the process is complete.

A better and stronger future

Bankruptcy offers you a way to deal with many different types of debt once and for all. A careful assessment of your case can help you understand if Chapter 13 bankruptcy is the best choice for you, or if there are other options that will allow you to regain your financial footing and face the future with confidence. You may benefit from speaking with a professional regarding the options available to you.