It is true that filing for bankruptcy can have an effect on credit scores. However, those scores have the ability to be rebuilt over time if Ohio residents are willing to put in the effort. The different types of consumer bankruptcy may affect when individuals need to start working on rebuilding their credit, and parties may wish to better understand how each type may affect them.
With Chapter 7 bankruptcy, individuals liquidate their assets in order to repay outstanding debt. This process typically takes only a few months to complete, and therefore, individuals will likely want to start working on their credit soon after their bankruptcy filing. In addition, individuals who have filed Chapter 7 may be able to qualify for new credit cards if they feel opening such an account can assist them and if they feel they can handle the responsibility.
For individuals who file for Chapter 13 bankruptcy, rebuilding credit right away may not be feasible. Unlike Chapter 7, Chapter 13 bankruptcy may take years to complete as a repayment plan is utilized. However, after the bankruptcy has been cleared -- typically in 3 to 5 years -- individuals may have the opportunity to begin rebuilding their credit.
Consumer bankruptcy may have a serious effect on a person's financial situation, but that effect does not have to be negative. Debts may be discharged completely or repaid under bankruptcy, and though credit scores may be affected, those scores often increase again over time. Ohio residents who are considering bankruptcy in order to handle their debt may wish to find out more information on the various processes.
Source: nashville.com, " Bankruptcy and You: Short-term Credit", June 2, 2016