How Does Chapter 13 Bankruptcy Affect Your Credit

It's important to realize how a Chapter 13 bankruptcy can affect your credit. There are both short term and long tern affects to be aware of.

How does Chapter 13 affect your credit? 

You may be thinking of filing for a bankruptcy discharge during financial hardship, and you’re confused about the effect it will have on your credit. What keeps a lot of people from filing for a bankruptcy discharge is the fear of getting a bad credit score. Sadly, most people filing for a bankruptcy discharge already have a bad credit score; as such, a bankruptcy discharge won’t have much effect on the credit score. Some things that affect a credit score are non-performing loans, late payment, judgments, and some adverse credit actions. 

For a lot of people, the best way to stop additional harm from coming on their credit rating is by filing for Chapter 13 bankruptcy discharge. 

How many points will I lose on my credit report when I file Chapter 13 bankruptcy? 

The drop in credit score depends on the credit score prior to filing for a bankruptcy discharge. 

Normally, individuals who have a high credit score experience a significant drop in their credit score, when compared to those who have a low credit score before filing for a bankruptcy discharge. It is estimated than an individual with a high credit score can experience up to 200 points reduction in credit score. However, an individual with a poor credit score may not experience more than 100 points drop. The good thing is that details of your bankruptcy will only appear for seven years, and ten years if it is Chapter 7 bankruptcy. However, you can take significant steps to boost your credit score during a Chapter 13 case. 

Statistics show that debtors see a significant increase in their credit score in less than two years of filing for a bankruptcy discharge, which is awesome news for an individual who wants to recover financially. 

How to Boost Credit Score while in Chapter 13 bankruptcy

How does filing for a Chapter 13 bankruptcy discharge affect your credit in Chapter 13? 

Before you can incur debt while in an active Chapter 13 case, you must first get approval from the bankruptcy court. However, most debtors who file for Chapter 13 bankruptcy must not stop paying their mortgage—this holds for some other payment schedule. 

One of the best ways to boost your credit score in an active Chapter 13 bankruptcy case is by paying your debt payments before the due dates. One of the largest factors that affect a credit score is payment time. 

You can boost your credit score by getting a secured credit card; however, you will need the permission of the bankruptcy court as you have to deposit with the company to secure its fees and charges. By doing this, you will improve your credit score in no time.

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