Does Bankruptcy Ruin Your Credit?

Published on: 27 May 2022 Last Updated on: 31 May 2024

Most people understand that bankruptcy can help you discharge the debt if you’re in a bad financial situation.

They also understand that bankruptcy can hurt your credit score. But can bankruptcy ruin your credit entirely?

The Importance of Talking With an Expert

First, if you’re considering filing for bankruptcy protection, make sure you talk to a bankruptcy lawyer. A bankruptcy lawyer will have the knowledge and expertise necessary to help you determine whether filing is appropriate for you and which type of bankruptcy you should pursue.

They’ll also help you understand the core process of filing for bankruptcy and setting your expectations for timelines, costs, and consequences. Lawyers are an indispensable resource here, so don’t neglect to hire one.

Different Types of Bankruptcy

You should also understand that there are different types of bankruptcy. Different types of bankruptcy manage debts in different fashions and have a different impact on your credit score.

For example, Chapter 7 bankruptcies tend to stay on your credit report longer than Chapter 13 bankruptcies, due to the fact that Chapter 13 bankruptcies frequently allow consumers to pay back a portion of their debts.

A chapter 13 case could benefit a person for numerous reasons. Typically, a person would file a chapter 13 case to save a house from a mortgage foreclosure action and a car from repossession, due to payment arrears.

A person may also file for chapter 13 protection to pay back only a portion of unsecured debt because they do not meet the chapter 7 criteria. Chapter 13 requires a person to make monthly trustee payments for 36 to 60 months. A chapter 13 case is completed after all monthly plan payments have been paid in full.

Chapter 7 bankruptcies allow an individual to eliminate all unsecured debt, such as credit card debt and personal loans. Therefore, a person who is only interested in eliminating unsecured debt would file a chapter 7 case, if one meets the criteria.

The chapter 7 case takes about four months to complete after the filing. No payments are required in a chapter 7 case.

The Impact of Bankruptcy on Your Credit

A chapter 13 bankruptcy filing stays on a credit report for 7 years from the date of the filing. A chapter 7 bankruptcy case, stays on a credit report for 10 years from the bankruptcy case filing date.

Typically, filing for bankruptcy has a negative impact on a credit score, although the filing may increase a person’s credit score, based on their financial circumstances.

The most important criteria impacting the credit score are as follows:

The shorter the credit history the less advantageous it;
Missing payments reflect a derogatory mark;
The amount of one’s revolving credit limit compared to the amount of the debt incurred.

The optimum debt to credit limit ratio is a debt balance of 30% of someone’s credit limit. The additional debt incurred over 30%, the more the credit score is negatively affected. For example, a person that used $3k of their total $10k credit limit has used 30% of their total credit limit. However, if the same person charges a total of $6k of the $10k credit limit, the ratio is increased to 60%, which reduces the credit score.

A person’s credit report lists their creditors and other facts regarding each creditor. This includes the status of payments; type of loan; length of the loan, and the loan balance. Typically, a credit report also reflects a bankruptcy filing, foreclosure action, repossessions, charge-offs, and debt settlements. The credit report also reflects a total score, indicating the general state of a person’s credit.

A prospective lender must analyze a person’s financial circumstances to determine: if they will issue the loan; what type of loan will be issued; the loan amount; the loan interest rate; and, the length of the loan.

Based on each creditor’s internal lending requirements, the determination of extending credit is based on a balancing act between the loan applicant’s credit report, income, expenses, the debt amount, debt payments, assets, and other information.

Typically, a person considering filing for bankruptcy protection is experiencing difficulty paying their monthly credit card payments and/or mortgage or auto finance payments. Consequently, such a person usually has a low credit score. The lower the credit score at the time of the bankruptcy filing, the less the impact the bankruptcy filing has on a credit score. Conversely, a bankruptcy filing will have a substantial impact on a person with a high credit score.

In general, a high credit score does not always guarantee that a person will obtain the loan they want with the best terms. A prospective debtor with an excellent credit score and substantial monthly credit card payments may experience difficulties, without filing for bankruptcy. What if a person with an excellent credit score has a very low income?

Let’s assume that a person with a high credit score, with substantial monthly debt payments, eliminates all credit card debt, in addition to other types of debt in a chapter 7 case. Initially, the person’s credit score will sustain a substantial hit, resulting in difficulty obtaining any loan.

However, within a reasonable time period, together with the proper credit repair, the person’s credit score will substantially increase. In the future, the person will apply for credit without their enormous monthly debt payment load.

Now, let’s assume that a person with a low credit score and substantial monthly debt payments eliminates all credit card debt, in addition to other types of debt in a chapter 7 case. Initially, the person’s credit score may sustain a minimal hit.

However, most likely this same person was experiencing great difficulty obtaining credit prior to the filing. If this person implements the proper credit restoration process, the person’s credit score will substantially increase, as well. Ultimately, within a short period, the bankruptcy filing will likely increase this person’s ability to obtain credit

Typically a bankruptcy mark on a credit report has a negative impact on prospective creditors to review. Generally, within one year after the completion of a chapter 7 case, the debtor (the person that filed) will experience great difficulty obtaining a loan.

Although obtaining a loan depends on the totality of the person’s financial circumstances, the rule of thumb for receiving automobile financing with a reasonable to low-interest rate is about one year after the completion of a chapter 7 case. The rule of thumb regarding the receipt of a reasonable to low mortgage rate is about two years after the completion of chapter 7.

Based on a debtor’s financial circumstances, she may be able to obtain automobile financing and/or a mortgage during the chapter 13 case. Otherwise, the same rule of thumb applies to a chapter 13 debtor as a chapter 7 debtor regarding obtaining a reasonable and low-interest rate after the case is complete.

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What Beginners Must Know About Trading Options In Dubai

When it comes to trading options, there is a lot that beginners need to learn to be successful. In Dubai, many traders are looking to get started in options trading. However, not everyone knows where to start. This article will examine some things that beginners must know about trading options in Dubai. We will look at where to find information and resources about trading options, choosing the right broker, and what strategies can help you succeed in the market. So if you are new to trading options or even have some experience but want to learn more, read on for helpful tips on the difference between stocks vs stock options. Sourcing information and resources There are numerous different sources that you can turn to when looking for information and resources about trading options in Dubai. One popular resource is online forums and discussion groups, which allow you to connect with other traders worldwide. These platforms can be a great way to learn from the experiences and insights of other traders and discuss your trading strategies and stay up-to-date on market trends. Additionally, many websites and blogs are explicitly dedicated to trading options, which provide in-depth analysis, tips, tutorials, and other resources. Finally, most brokerage firms offer educational resources such as live webinars or eBooks that can help you learn more about trading options. Whether you're a newbie or an accomplished trader, there is something that can help you expand your knowledge and improve your success. Choosing the right broker When it comes to options trading, choosing the right broker is essential. This is because your broker will act as your primary point of contact when you need help with your trades and will likely be the one responsible for helping you to manage risk and achieve your financial goals. Therefore, it is essential to evaluate potential brokers before settling on one carefully. Some key factors to consider are their experience in the industry, their regulatory status and background, and the features and tools. Ultimately, selecting a broker should be a process of trial and error, where you experiment with a variety of providers until you find one that meets all of your needs and provides you with the backing you need to succeed. However, with careful research and careful consideration, anyone can find the right broker for options trading. Strategies Options trading can be a highly profitable way to invest, but it also carries risks. To be successful, you need to clearly understand the market and the underlying factors that affect price movements. You also need to be disciplined in your approach and have a solid risk management strategy. Here are some tips to help you succeed with options trading: First, make sure you understand how options work before you start trading. It is a lot of information available online and in books, so take the time to educate yourself. Second, start with small trades and only risk an amount of money you can afford to lose. As you gain experience, you can advance the size of your trades. But always remember that there is risk involved and never trade more than you can afford to lose. Third, use stop-loss orders to limit your losses on each trade. A stop-loss order is an order to sell an option when it reaches a specific price. You can protect yourself from significant losses if the market moves against you by using stop-loss orders. Finally, have a plan for exiting both winning and losing trades. Taking profits early can leave money on the table but holding onto losing positions for too long can eradicate your profits. The final say Options trading in Dubai can be a lucrative venture, but only for those who understand how options work. For beginners, it is vital to understand the concepts behind options trading before risking any money on this type of investment. By following the recommendations in this article, you will be well on your way to mastering this exciting and potentially profitable form of trading. Additionals: 3 Forex Trading Tips and Tricks CFD Trading: Everything You Need to Know in 2021 Passive Income And Crypto Trading: Here Is How You Can Start Canada Is the First Country to Allow Trading BTC on Its Stock Exchanges

The 8 Smart Tips To Get A Smart Repayment Plan

The term repayment plan may refer to distinct things. For instance, it may refer to an individual plan someone drafts with a view of eliminating debt. In the same context, it may mean taking an initiative to enroll in a debt payment plan in order to settle a certain type of debt in the most appropriate way. Generally, the purpose is to save yourself from debts and get the lowest interest costs possible. It's something that can benefit you in a number of ways. For example, you will be shielded from the possibilities of becoming bankrupt. Still, you will protect your credit score from damage that comes with late payments or default. And as mentioned, getting a plan that offers the lowest interest rate is advantageous too. A repayment plan can be used in an unsecured loan you owe. But depending on the debts you need to settle, you may need various plans, each meant to settle a particular debt. For instance, think of credit card debt. With this one, it is up to you to come up with the best repayment plan, though you can also enroll in debt management plans offered by credit counseling institutions. Besides, a federal student loan may need a different approach. There are various federal student loan repayment programs you can use to service your debt. There are plans that will focus on helping you repay quickly in order to lessen the interest charges. Other plans may help you get a lower monthly repayment that perfectly matches your budget. Are you overwhelmed with tax debt? You can enroll in an Installment Agreement to settle the debt. Get a Smart Repayment Plan: It is good to think of getting out of debts. In fact, it is an initiative you are taking to regain control of your finances. Nevertheless, you will need to be pragmatic and realistic in order to manage your debts effectively. You did not take the debts you owe just overnight and the same way settling them won’t be that faster. The largest challenge to debt settlement is not even lack of determination or good intents- it is a failure to come up with a comprehensive program. And so, if you are already thinking of settling the debts that have burdened you for long, that is a positive step and with the commitment, you will make it. Start by getting organized: It is important to the records of different loans. Take note of the amount of each one of them, the interest rate they carry, and other terms of payment. If you have been taking loans all along, the chances are you owe different lenders different amounts with different interests and terms. As a result, you have to make a number of payments every month. You can easily get yourself into troubles if you don’t get organized. You may forget a payment and this may cost you dearly. After knowing the amount you owe different lenders, consolidate the debts into classes. By so doing, you will be able to understand where exactly you stand and even if it terrifies you, it is a good thing. Prioritize debts: Prioritizing your debts is among the basic loan tips recommended by one of the best moneylenders like Bugis Credit. It is good to prioritize according to how you want to settle them. You can arrange them either in ascending or descending order. However, it is highly recommended that you arrange them in ascending order as this will help you gain momentum. But from a technical point of view, ranking them starting with high-interest down to lower-interest loans is the best approach and will protect you from incurring ing too many costs. The order of priority is a personal decision, but once you have prioritized them, stick to the list. Design a strategy: After prioritizing your loans, the next step is to select a payoff strategy that will serve you in the best way possible. It is important to pick a strategy that will help you remain motivated to keep up: either settling smaller debts you have so as to gain momentum, or to deal with large interest rates loans first to lessen the overall costs. Irrespective of the approach you take, aim at maximizing the devoted to debt settlement every month. Direct all your financial efforts towards repaying off the debt. After clearing one, go to the next debt in the list. This may imply that you make small payments on other loans until you settle the highly prioritized ones. Remain consistent: If you are really determined to pay your loans fully, you must be consistent with payments. Do not shift your focus away from debt payment. The main challenge many people have to experience is feeling complacent upon clearing the first debt. Direct the same efforts and finances to the next debt with no fail. Consider using an app: Some mobile applications can help you significantly when it comes to a debt repayment plan. Some can even help you prioritize your debts and how to optimize your efforts. Besides, an app can help you track the progress you make as well as the incremental improvements made. It is so convenient to use mobile applications in handling your debts. Strengthen your savings: While it may seem impractical to save when you are already overwhelmed by debts, trust you me it is important to grow your savings in general. The focus is to stay out of debts and you can achieve this if you save. Do you really have to consider credit cards whenever emergencies strike? Besides, savings can help you settle some credit card debts before accumulate charges. Plan living out of debt: A smart loan repayment plan must encompass a strategy that will help you live out of debts. This involves making adjustments to your spending as well as financial conducts. Avoid doing things that will take you back to debts. Get more funds to settle your debts: Where can you get more money when you are already struggling with debts? Well, it is possible to devote more money to debt settlement. Reduce spending on some areas to accumulate more money and direct the extra obtained towards your plan. Alternatively, you can seek a part-time job or work overtime at your current place off work if there is a consideration for that. If you get some cash from gifts, donations or tax returns, devote them to your debt payment. Maintain your monthly budget if you cannot cut it. Conclusion: The way it takes time to accumulate debts, it takes time to settle them. Nevertheless, with a strong determination through an effective debt repayment plan, you can manage to repay all of them and live out of debts completely. In fact, if you maintain healthy financial habits and devote the money you’ve been using to settle debts to savings, you will be on the route to financial independence. Read Also: Eight Essential Tips For Getting Out Of Debt 5 Must-Have Long-Term Goals For A Secure Future How To Stay Safe When Making Mobile Payments Are Debt Consolidation Loans Recommended For Credit Card Consolidation

7 TIPS TO REDUCE CREDIT CARD BILLS

If you have a large amount of credit card debt and you are only making minimum payments every month, you are not going to pay it off any time soon. In fact, if you only make minimum payments, it could be decades before you find yourself debt-free again. It is extremely important to put yourself in a proper financial position, and a good way of doing that is by reducing your credit card bills. Tips to reduce Credit Card Bills: Here are a few tips on how to reduce your credit card bills that will help you pay off your debt: 1. Take Stock: Before you start to reduce your credit card bills make sure you know where you stand. By this, we mean know your target. You will never hit the target if you don’t know where it is, so be honest with yourself. 2. Pay more than the minimum: As discussed before, if you only make minimum payments each month, then it will take ages before you find yourself debt-free again. Thus, it is clear that paying more than the minimum due you can lower your monthly credit card bills, but still, so many customers struggle in making that the priority. Making a little more than the minimum payment every month will eventually help you in the long run. 3. Ask your credit card company for lower rates: A simple and quick way to lower your credit card bill is by negotiating a lower interest rate. Just by reducing the rate of interest by one or two percent, you can save hundreds of bucks. Try calling your creditors and ask them politely to lower your rates. If you have a good credit score and have been a loyal customer to them, then you can easily negotiate and get yourself a lower interest rate. 4. Target one card at a time: People often use multiple credit cards to buy stuff. More cards mean more accounts which eventually leads to more debts. If you are using multiple credit cards, then a good way to lower the bill is by targeting one card at a time. Focus on one account and try to clear that first. Get the minimum for each card, but pay as much as you can on the card you are targeting first. Usually, paying the card with the highest interest rate works. 5. Make a budget: Make yourself a budget every month and stick to it. It can be difficult to adjust your lifestyle too quick, so instead, try going for small adjustments. It can be as simple as cutting out one or two pizzas each week or by changing your thermostat by few degrees. Reducing your costs a little bit can help you out in the long run. Remember to save yourself a few extra bucks every month in case an unexpected bill pops up. 6. Make two minimum payments every month: A good way to lower your bill is by making two minimum payments. Since credit cards apply interest daily, cutting your balance during the month will reduce the minimum payment for the next month. 7. Transfer your balance: Another good way to reduce your monthly payments is by transferring the balance from a card with a high-interest rate to a card with a low-interest rate. If done properly, this can save you hundreds of bucks every year. Remember that credit cards with a low rate of interest are mostly introductory offers which last about a year and a half, so make sure pay off the debt before the rate of interest increases. Conclusion: We hope these tips can help you to reduce your credit card bills. If you know more tips on lowering the bill, post them in the comment sections below! hence if you want to make your choices in the right direction then the use if the credit card bills can make things work for you in all possible manners. Work out the best strategy that can help you to achieve your objectives in the best possible ways. Read Also : Are Debt Consolidation Loans Recommended For Credit Card Consolidation Credit Card Fraud The Holiday Season: Things To Consider For Next Year What Are The Important Parts Of A Free Business Credit Report?

Does Bankruptcy Ruin Your Credit?

The Importance of Talking With an Expert

Different Types of Bankruptcy

The Impact of Bankruptcy on Your Credit

B Corps Vs Public Benefit Corporations: Understanding Ethical Investing

What Is A Pay Stub?

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Content Rally wrapped around an online publication where you can publish your own intellectuals. It is a publishing platform designed to make great stories by content creators. This is your era, your place to be online. So come forward share your views, thoughts and ideas via Content Rally.

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Content Rally wrapped around an online publication where you can publish your own intellectuals. It is a publishing platform designed to make great stories by content creators. This is your era, your place to be online. So come forward share your views, thoughts and ideas via Content Rally.

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