Many people in Iowa feel that bankruptcy is an insurmountable barrier to rebuilding credit, credit history and good credit score. It is true that one of the unavoidable consequences of filing bankruptcy is the effect on your credit. However, the presence of a Chapter 7 or Chapter 13 bankruptcy filing on your credit history is not enough reason to discount bankruptcy as relief from your financial problems.
Should You File Bankruptcy?
For many hardworking Iowans, the thought of filing Chapter 7 or Chapter 13 bankruptcy is irresponsible and unnecessary. However, if you consider bankruptcy as a process to second chances, not defeat, it is easier to consider it a viable option to right a sinking financial situation.
Experts estimate that thousands of people are financially bankrupt, but refuse to file for legal bankruptcy. Issues such as pride and embarrassment keep these families from even investigating bankruptcy in Council Bluffs, Iowa. However, the right time to file bankruptcy in Iowa is before your financial situation necessitates emptying retirement accounts or causes the loss of your family home to foreclosure.
Of course, for every recommendation that Chapter 7 or Chapter 13 bankruptcy could reboot your financial situation, there are drawbacks to consider. The bankruptcy process can be strenuous and uncomfortable. There are specific procedures that must be followed and individuals are obligated to relinquish temporary control of their financial situation. Finally, bankruptcy will affect your credit.
Types and Process of Bankruptcy
There are two distinct provisions for individual bankruptcy under the federal Bankruptcy Act, Chapter 7 and Chapter 13. These processes are federally mandated and regulated, and therefore rely on federal law and regulations to be carried out. Yet, it is still helpful to have a local, Iowa bankruptcy lawyer advise on your situation.
Chapter 7 bankruptcy discharges most debts held by an individual. This includes unsecured debts such as credit card charges and medical expenses. Throughout this process non-exempt property can be sold to repay creditors, but the Exemption Laws of Iowa provide robust protection for any property that is essential to health and well-being. An Iowa attorney will be familiar with the specifics of the Exemption Laws and what property is covered.
Alternatively, Chapter 13 bankruptcy operates more like a payment plan. A proposed plan is submitted to the court, and the debts that can reasonably be paid within 3-5 years must be paid, but other debts are discharged.
Bankruptcy Effect on Rebuilding Credit
Your credit score is a reflection of your overall financial stability, and if you are missing essential payments or accumulating debt, it is likely that your credit score is already falling. Therefore, if bankruptcy is the right legal action for an individual, the focus should be on how to recover your financial health and rebuild your credit after bankruptcy, not on the initial effects.
Many people wonder if future creditors prefer one type of bankruptcy to the other. The answer provided by credit score companies is that both Chapter 7 and Chapter 13 bankruptcy have a similar affect on credit score and the future capacity for receiving loans or a mortgage. However, lending institutions posit that creditors may look more favorably on a Chapter 13 filing, as it assumes responsibility for some repayment.
Rebuilding Credit Capacity and Score
The process of rebuilding credit after bankruptcy should begin immediately. By federal law, Chapter 7 and Chapter 13 bankruptcy remain on your credit history for a period of 10 years. Despite this legal time frame, people in Council Bluffs can take action right away to improve their chances of future lending and consideration from creditors.
The effect of a bankruptcy filing will fade over time. What creditors will notice is what you did in the interim. Make a budget and timely repay any new credit or debts. Early on look for secured loans, co-signed loans, or secured credit cards as options that will make you a less risky borrower.
Speaking with a Lawyer
If you have questions regarding bankruptcy and your credit history or need legal advice regarding the other effects of bankruptcy on your financial situation, debts, and property, contact Charles L. Smith and Nicole Hughes at Telpner Peterson Law Firm, LLP. Our Council Bluffs office can be reached by phone at 712-309-3738.