What damages credit score
By Jane McNamara
Dear Let's Talk Credit,
What is the difference (impact on credit rating) between debt settlement and bankruptcy? My wife and I have $90,000 in credit card debt across five companies and are unable to handle the monthly payments. -- Eric
Bankruptcy will generally cause the most damage to your credit report. Chapters 7 and Chapter 11 bankruptcies remain on your credit report for 10 years from the date filed. A Chapter 13 bankruptcy will remain on your report for seven years from the date of filing. The accounts associated with a bankruptcy or debt settlement are removed from your credit report seven years from the first date of delinquency.
Begin by consulting with a nonprofit credit counseling agency member of the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling. You may qualify for a debt management plan. which could allow you to repay your debt with an affordable monthly payment that would not damage your credit like debt settlement or bankruptcy.
If you don't have enough income for a debt management plan or decide that you would rather pursue another option, keep in mind that debt settlement will likely require you to make a lump sum payment to settle the account. For most
people, that would require stopping all payments on accounts and saving money until you have enough to make a settlement offer. In the meantime, your credit will be damaged and you could be sued in court by your creditors.
Filing bankruptcy can be costly. Chapter 7 bankruptcies are limited by strict income requirements. A Chapter 13 bankruptcy would require you to repay at least a portion of the $90,000 that you owe to your creditors over a five year period. The judge will decide how much of your income will be required to repay your creditors based on the bankruptcy laws that apply in your state.
If you are interested in exploring debt settlement or bankruptcy options, I recommend that you consult with an experienced attorney.
The key to moving on from this large debt and the consequences it brings is to avoid accumulating that much debt again in the future. Be sure you have a plan moving forward to prevent accumulating debt, and put aside savings for emergency and unexpected expenses.
Let's keep talking!
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Sally Herigstad,Source: www.creditcards.com