When you are drowning in debt, you might delay filing for Chapter 13 bankruptcy because you are worried about the impact it will have on your credit score. It can leave you ineligible for new lines of credit until it’s off of your credit report. However, staying in debt and being delinquent on payments can also have severe effects on your credit score.

 Learn how Chapter 13 bankruptcy can impact your credit score and borrowing opportunities, and how a bankruptcy attorney can help.

What Happens to Your Credit After Chapter 13 Bankruptcy?

When you file for bankruptcy, it will show up on your credit report. However, Chapter 13 bankruptcy can have less severe impacts than Chapter 7. In Chapter 7 bankruptcy, you will likely need to liquidate your assets to pay off some of the debt. In contrast, in Chapter 13 bankruptcy you will reorganize your finances and create a repayment plan to pay back your debt. Because you are repaying your debts, lenders may be less concerned about the bankruptcy on your credit report and may not be as hesitant to give you a loan.


Your score itself may not be greatly impacted – depending on your credit score before you filed bankruptcy. Your score was likely low before you filed Chapter 13 due to large amounts of debt on your credit report. If you had a high credit score before filing for bankruptcy, then you can expect it to be significantly lower after the bankruptcy shows up on your credit report. 


A Chapter 13 bankruptcy will stay on your credit report for seven years after you file for bankruptcy. While this might seem like a long time, it’s less than if you file for Chapter 7. A Chapter 7 bankruptcy may stay on your credit for 10 years. When your bankruptcy is finalized, you should get copies of your credit report to look at its impact on your credit score.


If you have concerns about the effect Chapter 13 bankruptcy will have on your credit report, consult your bankruptcy to review your options.


Can You Get New Credit During Chapter 13 Bankruptcy Proceedings?

You might be concerned about your chances of getting new credit while you are going through the Chapter 13 bankruptcy proceedings. It’s important to know that while you’re creating your repayment plan and paying off debt, you might be ineligible for new lines of credit. Lenders could deem you too risky of a borrower before you complete your repayment plan. If you know you will need to apply for credit before your bankruptcy is finalized, it’s important to work with your bankruptcy attorney to review your options.


What To Expect When Applying for Credit After Chapter 13 Bankruptcy

After you complete the Chapter 13 bankruptcy process, you may be able to get lines of credit. However, it’s important to know what to expect. 


If a lender grants you a loan, you may have to pay higher interest rates. However, once you can show lenders that you can repay your debts on time, over time your credit score will improve and your interest rates should go down.


When filing for Chapter 13 bankruptcy, work with your bankruptcy attorney to have your questions answered and to set expectations. Lawyers have experience to let you know what could happen.


Contact an Attorney

If you are sitting on mounds of debt and want to file for Chapter 13 bankruptcy, it’s crucial to hire an experienced attorney to help you through the process and get the money you are owed. Don’t let debt ruin your life. Call (405) 529-9377 for a free case review.

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