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What are some important facts about bankruptcy?

On Behalf of | Aug 29, 2020 | Bankruptcy

Bankruptcy can be a beneficial step if you have financial issues. It provides relief from your debts and prevents creditors from garnishing your wages or seizing your assets. 

Many people use their right to bankruptcy protection each year. The Consumer Financial Protection Bureau states that between 2001 and 2018, there was a large number of filers with high mortgage debts. 

Chapter 7 vs chapter 13

Statistics from this time period show that if you file Chapter 7 that you have a higher chance of discharge than if you file Chapter 13. One thing to keep in mind is that a Chapter 7 bankruptcy does not take as long as a Chapter 13 because a Chapter 13 bankruptcy is a repayment plan that lasts three to five years. The bankruptcy discharge does not occur until you complete the repayment plan. This may affect the discharge rates. 

The means test

The means test that you must take prior to filing bankruptcy has a large impact on which type of bankruptcy you can file because you have to meet income limits. Since the enacting of the means test, the number of people filing for Chapter 7 has dropped. It was around 75% of filers prior to the means test and is now at around 63%. 

Credit scores

After filing bankruptcy, you probably want to start rebuilding your credit. In most cases, you should see your credit score slowly rise as soon as you get your discharge. Since Chapter 13 takes longer to discharge, you will see your credit rebound more slowly than if you file Chapter 7.