What happens when I file for bankruptcy?

Filing for bankruptcy should always be an absolute last resort. It is the most damaging thing you can do to your credit. A bankruptcy can stay on your credit report for seven to 10 years. You may be able to get a loan or a credit card during that time, but it will cost you a lot of money because your interest rates and fees will be so high.

Filing for bankruptcy is a very serious credit decision. There are two types of bankruptcy:

Chapter 13
You “reorganize” your debt and negotiate a new payment plan, which are usually scheduled over a three- to five-year period. Some of your debt is reduced with the new payment plan. Chapter 13 bankruptcy stays on your credit report for seven years from the date you make your final payment from the negotiated plan.

Chapter 7
All of your debts will be erased. You start your credit life over. This type of bankruptcy stays on your credit report for 10 years from the date of filing.

Bankruptcy: Pros and Cons Reason to File, Reasons Not To
Reasons to File	Reasons Not to File
• You don’t think you can repay your debts in three to five years. • It is your very last resort; you’ve carefully considered all of your options, and getting a clean slate is the only way to get on with your life.	• Can reduce your credit score up to 200 points. • Filing will stay on your credit report for seven to ten years. • You will pay the highest interest rates for credit and loans.

Source: Your Credit Score by Liz Pullman Westin, Girl, Get Your Credit Straight!by Glinda Bridgforth