What Will Happen to My Credit Score After Filing Chapter 7 in Arizona?

Credit Score

If you have started looking into bankruptcy as a solution for crushing debt, you are no doubt aware that the legal proceedings will affect your credit score. Understandably, you might hesitate due to concerns about your financial future, but your current situation is probably grim. Creditors are calling, and you are only able to make minimum payments on your accounts after you slash your budget. The balance grows and you begin to fear additional collection actions.

Bankruptcy may be an option for taking control of your debt, but you are right to question what will happen to your credit score after filing Chapter 7 in Arizona. You rely on credit for financial opportunities, housing, owning a business, and possibly even for your job. Fortunately, the numerous benefits of bankruptcy outweigh the negative effects. It is important to consult with an Arizona Chapter 7 bankruptcy attorney about the specifics and how the process works. You can review some information on how these cases affect credit history.

Overview of Chapter 7 Bankruptcy

To gain an understanding of the impact on your credit, it is helpful to learn about the basics of Chapter 7. This type of bankruptcy allows you to discharge qualifying debts, so you owe nothing to creditors when the case is over. You must qualify under the Chapter 7 rules, which require that:

  1. Your income must be below the state median income level for a household of your size.
  2. If you do not automatically qualify through your income, you may still meet the Means Test. This analysis includes monthly expenses that you pay.

Though you do not directly pay back creditors, the bankruptcy trustee could satisfy your debt through its powers of liquidation. The trustee sells the property and uses the funds to pay some of what you owe. Liquidation only applies to nonexempt assets, so you can protect some.

Chapter 7 and Your Credit Score

When you are wondering what will happen to your credit score after filing Chapter 7, you probably want information related to both your credit report and score. They are closely associated:

  • A credit score is a number assigned to you based on prior experiences with credit and loans. A lower score is a disadvantage because it reflects negatively on the person’s ability to make payments on a debt.
  • Your credit report is a history of personal financial information, tracking bill payments, loans, current debt, and legal actions. It will also list bankruptcy cases.

With Chapter 7, your credit score could drop up to 200 points or more depending on your unique debt situation. Plus, the bankruptcy case will remain on your credit report for 10 years. Note that Chapter 13, another type of bankruptcy case for individuals, is in your history for 7 years.

Tips on Rebuilding Credit After Bankruptcy

The benefits of Chapter 7 and getting a new lease on your financial life are significant, despite the hit to your credit. Consider the fact that you could be paying debts for decades unless you go through bankruptcy discharge, far longer than if you eliminate them. Plus, there are ways to boost your credit score:

  • Always pay bills for utilities, cable, and your cell phone in full, and on time.
  • Apply for a secured credit card, in which you deposit funds as security for the use of credit.
  • Continue to pay your mortgage along with other bills, as these payments create a track record of financial responsibility. 

Legal Help with Chapter 7

There are multiple stages to Chapter 7, from preparations and filing documents to wrapping up your case at the end. The rules are complicated, so count on a bankruptcy lawyer in Arizona to guide you through each step of a Chapter 7 case:

  • Explaining requirements before filing, including the credit counselling session you must take within 180 days before starting your case;
  • Reviewing and organizing your financial documents, including paperwork regarding your assets, debts, income, and expenditures;
  • Preparing the Chapter 7 bankruptcy petition, along with schedules;
  • Attending the meeting of creditors with you, where creditors ask questions and review the information you included in your petition;
  • Advising you on exemptions that you can apply to real estate, vehicles, work-related equipment and tools, bank accounts, and personal belongings; and,
  • Finalizing your case and obtaining the final discharge order.

You Can Trust a Chapter 7 Bankruptcy Attorney in Arizona for Support

Though there are impacts on your credit score after filing Chapter 13 in Arizona, you can ways you can benefit. To ensure the best outcome in your bankruptcy case, please contact DebtBusters at (866) 223-4395 or visit us online. We can set up a free consultation to discuss your case at our offices in Scottsdale, AZ. Once we review the details, an Arizona Chapter 7 bankruptcy lawyer will provide details about the process.

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