Before filing a Chapter 7 case, you should learn as much as you can about bankruptcy. What benefits does Chapter 7 offer for your debts? How long will it take? How will it affect your credit? Asking about the effects it has on your credit is a wise question to discuss with your bankruptcy attorney as it can help you determine if you should file. Here are some of the effects that you can expect with your credit if you use Chapter 7 bankruptcy.
Your Filing Posts to Your Credit Report
When you initially file your Chapter 7 case, it might not appear on your credit report. However, it will appear at some point. Generally, it posts to your credit report by the date the court provides the discharge. The worst part about this is that it posts as a derogatory item on your report and remains there for ten full years. You cannot get the posting removed early through any attempt you might make. This posting might cause a sudden decrease in your credit score, depending on what your score was before you filed.
Your Balances Go to Zero
One of the key benefits of Chapter 7 bankruptcy is that it provides a discharge of debts, which is equivalent to forgiving you of all your loans. Every debt that the court discharges will be updated on your credit report to reflect a zero balance. Each debt might also state that it was part of your bankruptcy case, but this does not have a great deal of effect on the debts. The benefit of this step is that it greatly reduces your debt balances, which might help your credit score. In other words, your score might increase a little from these postings.
Your Accounts Close
When you file for Chapter 7, the filing will automatically require closing all your credit card accounts, even if you have zero balances when filing. You cannot keep any credit card accounts open when you file. Instead, the creditors close the accounts when they receive the notification that you filed for bankruptcy. These accounts will not instantly drop off your credit report, though, but they will show that they are closed.
As you can see, filing for Chapter 7 bankruptcy affects your credit score and report. Your bankruptcy lawyer can give you some advice to help you improve your score after filing if you desire to do so.
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