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Bankruptcy would seem like the perfect solution when debts get out of control and there is no other option left. This is normally the last resort that people choose, to be able to avoid annoying calls from creditors. If you file for Chapter 7 bankruptcy protection, then you can expect almost all of your debts to disappear. Filing for bankruptcy for Chapter 13 also works well and here the debt can be paid off over a schedule that suits you and you also don`t have to deal with annoying calls from creditors. However, there is a bit of problem with this line of reasoning. The debt almost disappears and that is fine, but what happens to the negatives that are going to be associated with the filing for Chapter 7 or Chapter 13 bankruptcy protection.
More American citizens would have actually filed for bankruptcy by the end of 2010 than any other year since 2005. This was before the changes were brought about to the bankruptcy laws and filing for bankruptcy became more difficult for clients. Most of these customers didn`t take the negatives into consideration while filing for bankruptcy.
The Chapter 7 bankruptcy filing shows up on your credit report for 10 years and Chapter 13 bankruptcy filing tends to remain in the credit report for 7 years at least. This period will be very difficult for consumers as they will not be able to avail any loan or mortgage, personal loans, auto loans etc. They will also fail to qualify for the high-interest rate credit cards. When people file for bankruptcy it is obvious that banks and lending institutions will look at these people as high-risk and will avoid giving them loans as they are likely to default on their loans as well as miss on credit card payments. It is quite natural for institutions to feel this way. By resorting to bankruptcy protection they have, in a way shown, that they are irresponsible.
Now that the damage is done, the next step would be to do some credit repair. Immediate steps should be taken to do the necessary credit repair and boost the credit scores. The first step should be to make all credit card payments on time and refrain from running up further credit card debts. Close all credit card accounts that are not in use and have patience while building your credit report as it takes time before the damages of filing for bankruptcy can be erased.
