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How Does Chapter 13 Bankruptcy Affect Your Credit?

Effective October 2005, Congress made sweeping changes to the bankruptcy laws. The net effect of these changes is to give consumers more incentive to seek bankruptcy relief under Chapter 13 rather than Chapter 7. Chapter 13 allows you, if you have a steady income, to keep property, such as a mortgaged house or car, that you might otherwise lose. In Chapter 13, the court approves a repayment plan that allows you to use your future income to repay your creditors all or part of the money that you owe them within 3 years or 5 years, depending on your income and other factors, rather than surrender any property. After you have made all the payments under the plan, you receive a discharge of your debts.

A Chapter 13 bankruptcy is designed to give individuals with a consistent income a court-ordered repayment plan. When a Chapter 13 is filed, the individual (called a debtor in this case) works with a trustee to repay creditors on a schedule over a three to five-year period. When the payment plan is completed, any remaining eligible debts are discharged.

Chapter 13 bankruptcy does not get rid of:

Credit Repair Questions

One of the great advantages of chapter 13 is that it gives the debtors an opportunity to save their homes from foreclosure by allowing them to "catch up" by making past due payments through a payment plan. After you make all the payments under your Chapter 13 plan, many of your debts will be discharged. The debts that will not be discharged and that you may still be responsible to pay include:

Certain taxes
Student loan obligations
Child support payments
Alimony payments
Fines, penalties, forfeitures, and criminal restitution obligations
Debts for fraud or theft
Most criminal fines and restitution obligations
Certain debts that are not listed in your bankruptcy papers

Effects of Chapter 13 Bankruptcy on your Credit Score

Chapter 13 bankruptcy or any bankruptcy for that matter is considered a very negative event and will have a devastating effect on your credit score. A Chapter 13 bankruptcy filing is noted from the public records and will remain on your credit reports and affect your credit scores for 7 years from the filing date.

Chapter 13 bankruptcy Scenario #1
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How long does negative information stay on your credit report?
Late payment
7 years
7 years
10 years
Foreclosure
7 years
Charge off
7 years and 180 days
Credit Repair after Bankruptcy or Foreclosure
Credit Repair after Bankruptcy or Foreclosure
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