Is Chapter 13 Bankruptcy Better For My Credit Score than Chapter 7 in New York City?
The potential negative effects on a credit score is the primary concern for most people considering bankruptcy relief in New York City. While the rumors that bankruptcy will ruin your life forever are patently false, it’s true there are some ramifications to credit score when you file bankruptcy. No bankruptcy attorney in New York City will tell you bankruptcy is good for your credit, but the negative marks on your credit report can be somewhat mitigated by the type of bankruptcy you choose to file. A big advantage to filing Chapter 13 over Chapter 7 in New York City is that the negative effects you feel from the hit to your credit score will go away much faster than with a Chapter 7 case.
Both Chapter 7 and Chapter 13 are limited by the Fair Credit Reporting Act in how long they may legally appear on your credit report. While the maximum length of time any bankruptcy can remain on a credit report is ten years, this is ten years from the date of the filing, not from the date of your discharge. If you file a Chapter 7 your discharge may come relatively soon, and your credit may be impacted for up to ten years. A Chapter 13 repayment plan on the other hand takes 3-5 years to complete so by the time you are finished you could be halfway to having your credit fully restored. Since you will need to live on a tighter budget during this time anyway most will notice the negative impact on their credit score less during the time they are making their Chapter 13 payments. Chapter 13 Bankrutpcy will come off of your Credit Report after 7 years.
Also, if you need to access credit during the time after your bankruptcy but before your plan is concluded you will have a much better chance with a Chapter 13 on your credit report than with a Chapter 7. If a lender sees Chapter 13 on a credit report they know you at least did everything you could to repay as much of your debt as possible without going into complete financial ruin. Doing the best you can by paying at least a portion of your debts is better than a Chapter 7 which does not repay creditors at all.
Credit trouble is what usually pushes people into filing bankruptcy protection, and depending on your situation a Chapter 7 may still be the best fix. It will give you quick relief from you debts, but a Chapter 13 might make things easier on you, your family and your credit for the long run. Work with an attorney experienced in both Chapter 7 and Chapter 13 cases as sometimes the best relief will come from combining the two forms of bankruptcy with a converted case or even two separate filings. Bankruptcy is a complicated area of law, but the bankruptcy process for a consumer is much easier than most people believe. If you live in New York City contact the Law Offices of William Waldner online or at 212.244.2882 to arrange a free consultation today. We mainly practice bankruptcy law and maintain a 99% Chapter 7 bankruptcy discharge record in New York City as of 9/11/15.
**** DISCLAIMER: This article is intended for educational purposes only. By reading no attorney-client relationship has been created. Prior results do not guarantee a similar result for future clients. Attorney Advertising. Debt Relief Agency