How Long Does a Bankruptcy Show on Your Credit Report
Bankruptcies can be extremely serious financial events, and they can be very difficult to recover from. If you are currently considering bankruptcy you may be wondering what its effects on you will be and how long it will take to recover from bankruptcy. There are a few things that you should probably consider before you declare bankruptcy, because declaring bankruptcy is a large step and will affect much of your financial future.
What Are the Types of Bankruptcy?
- Payment plan bankruptcy
- Payment plan bankruptcy allows you to create a payment plan and reorganize your debt so that it is structured in a way that it can be paid off. This type of bankruptcy will usually affect your credit report for about seven years, which is less than dissolution bankruptcy but still significant. However, often a debt management plan will provide more benefits than a bankruptcy in this scenario.
- Dissolution bankruptcy
- Dissolution bankruptcy is the traditional type of bankruptcy that dissolves both your debts and your assets. Dissolution bankruptcy can be very useful for those who want a fresh slate but it will affect their credit rating for 10 years.
How Will a Bankruptcy Affect Your Credit?
Bankruptcy will severely lower your credit directly after it occurs, and many lenders are not sure how to handle car loans after bankruptcy claims that people make. There will still be some options, however, such as dealership loans. Bankruptcy will slowly drop off your credit report throughout the seven or ten years, which means it will not affect your credit score as much during the final years as it does during the first few years.
How Can You Recover From Bankruptcy?
It is still possible for you to rebuild your credit while you still have a bankruptcy on file. You should concentrate on paying all of your bills on time, maintaining credit cards that have their balances paid off in full at the end of every month, and getting some form of installment loan such as a car loan. Automobile loans in particular are very good for recovering from bankruptcy because they can be obtained with a bankruptcy on file.
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