Filing A Bankruptcy: Credit Report After Bankruptcy

It is essential that consumers understand that bankruptcy is an extremely serious financial situation brought upon a creditor either voluntarily or involuntarily. Either way bankruptcy affects your credit report dramatically. Once you have been declared bankrupt, although you may feel that you are relinquished of your debt obligations, bankruptcy brings with it a whole new string of issues and your credit report after bankruptcy may not paint a pretty picture. Filing a bankruptcy credit is a public record and hence stays on your credit score rating for a period of 10 years or more. The effects of bankruptcy on your credit report may be summarized as follows:

• Filing a bankruptcy is viewed as extremely negative by credit providers. This is considered the worst kind of adversity on your credit report and even supersedes delinquencies and accounts in collections/judgments.
• A bankruptcy on a credit report makes obtaining credit through major channels extremely difficult as lender look at bankruptcy credit clients unfavorably.
• A bankruptcy credit charge on your credit report could lower a good credit report score rating by 100 points or more.
• In the event of filing a bankruptcy all debts are not discharged.
• It is important to understand your debt obligations in the event of being declared bankrupt. Debts such as taxation obligations, student loans, child support and alimony are not discharged. The payments on these obligations need to be made or they will further adversely affect your credit score report.
• Consumers with a bankruptcy credit report may be able to obtain credit through sub-prime channel/non-conforming lenders but this is usually at a very high interest rate and that in turn means you are spending a lot more money.

Fresh Start Bankruptcy

Once a consumer has been declared bankrupt, it is regarded as a fresh start for them and this is known as a fresh start bankruptcy. The consumer with bankruptcy on their credit should now focus on rebuilding their credit report. Although this is a long and tedious process it can be done.

• One way to start is by obtaining small secured amounts of credit and making regular and timely repayments and focusing on paying it back as soon as possible. This will help show good character on the part of the bankrupt consumer.
• Another vital tip is for consumers with bankruptcy on credit reports to obtain their credit score ratings regularly and monitor their progress.

Alternatives To Bankruptcy:

As stated earlier, bankruptcy must be treated as a last resort and consumers should consider all possible bankruptcy alternatives before filing for a bankruptcy. A few possible alternatives to bankruptcy are:

• Managing Your Own Finances: If you feel like you are coming under undue and increasing financial pressure and you money managers are not coping with your changing situation, it might be time to roll up your sleeves and take control of your finances before you end up filing a bankruptcy.
• Debt Mitigation/Restructuring: In the event that you feel you are unable to cope any further with your debts, talk to your creditors and negotiate with them an amount they will accept in return for forgiving a portion of your debt without demanding a bankruptcy on your credit report. Most financial institutions are willing to provide their customers with debt mitigation services.
• Consolidation: Debt consolidation is a powerful tool in managing your debts. This allows consumers to roll all their debt into on facility and make one larger repayment instead of numerous smaller ones and often prevents bankruptcy on credit reports from appearing.
• Filing Chapter 13: This is another powerful tool or bankruptcy alternative which is available to US consumers struggling with their debt obligations. Chapter 13 Wage earner plan is an arrangement which usually lasts for a period of 5 years. The funds earned by the consumers are distributed among the creditors. This could save a person from declaring bankruptcy.

Filing a bankruptcy is a major setback for credit score ratings and therefore it cannot be reiterated enough that a consumer must think seriously before filing for a fresh start bankruptcy. However if you do, your next course of action should be concentrating on removing bankruptcy on your credit report and rebuilding your credit score rating.

Declaring Bankruptcy: Legal Definition

Declaring bankruptcy may be defined as “The legal inability to pay debt” or the state where a person is legally declared bankrupt according to bankruptcy laws. Simply stated when the debts of a consumer are far exceeded by his/her income/assets an individual is considered to be bankrupt and needs to file a bankruptcy.

File A Bankruptcy – Types of Bankruptcy

If your credit standing is irreparable even after debt consolidation, debt counseling and other kinds of credit help, you may have no other option but to file for a bankruptcy. You should know that the most common types of bankruptcy as laid out by bankruptcy laws are:

• Voluntary: This is also referred to as a Debtor’s petition. When an individual or organisation owes another money, he/she may either enter voluntary bankruptcy or may file a debtor’s petition to file a bankruptcy. On the acceptance of this petition the individual is automatically declared bankrupt.
• Involuntary (Creditors Petition): If the amount owing to a creditor exceeds $2,000, they may join with other creditors in an attempt to declaring bankruptcy of the individual. In order to do this the creditor must first obtain a judgement from the court and then apply to the official receiver to issue a notice to the debtor demanding payment within a set date (usually 21 days). If the debtor fails to do so then the creditor can appeal to the Federal Magistrate court asking for the debtor to be declared bankrupt.

Bankruptcy Law: Declaring Bankruptcy Facts

In general, bankruptcy gives honest debtors a new start and helps them rebuild a credit report from scratch when they file a bankruptcy. However, it is advisable to think carefully before filing a bankruptcy as it has many repercussions. The following are a few characteristics of the laws of bankruptcy:

• Bankruptcy law is a federal law and is contained in Tier 11 of the United States code. The states have no regulation over this.
• Filing for bankruptcy allows debtors a chance to resolve their debts.
• Declaring bankruptcy allows debtors to be freed from all obligations once their assets have been distributed even if their debts have not been paid in full.
• Bankruptcy law allows for the interest of all creditors to be treated with a certain amount of equality.
• In certain cases the bankrupt debtor may continue to remain in business and may be allowed the use of the revenue generate to dispose of his/her debts.
• Bankruptcy cases are litigated in the US bankruptcy courts.
• Bankruptcy is of 2 types, i.e. voluntary and involuntary.

Declaring Bankruptcy: How To File Bankruptcy

The process of filing a bankruptcy starts with the filing of a petition with the Bankruptcy court. This further gives rise to a bankruptcy estate which includes all the assets and liabilities of the person filing for a bankruptcy. The taxation obligation may vary depending upon on the chapter under which the bankruptcy petition was filed. When a debt is owed to a person and is cancelled, the cancelled debt is usually treated as income and adds to the tax obligation of the individual. However if the debt is cancelled when filing for a bankruptcy, the debt is not taxed but would in turn reduce the tax benefits the individual would otherwise be entitled to.