Bankruptcy Medicine
There is no denying it: the bankruptcy process is not something anyone wants to go through. It is a big step to meet with an attorney, disclose detailed information about your personal finances, and file a federal bankruptcy case to discharge debts. However, bankruptcy is a legal remedy that does help people who desperately need relief from overwhelming debt. The bankruptcy process will cure an unhealthy situation and put you on a course to financial well-being.
Most of my clients ask me whether bankruptcy will destroy their credit score. Well, the long-term answer is generally, "No." In the short-run your credit score may drop and it takes time and patience to recover. Typically, one to two years of responsible post-bankruptcy credit management is required before a credit score is returned to the "average" range. Either way, chances are your credit score is already pretty low if you are considering filing bankruptcy. In most cases, a bankruptcy is the first step towards rebuilding your credit.
While a drop of your credit score after bankruptcy is possible, the effect on a credit score from debt negotiation can be much, much worse. Debt settlement is known by many names including "debt settlement" or "credit counseling" and includes any debt relief program in which the creditor receives less than full payment or agrees to terms different from the original credit contract. During any settlement or repayment program missed or late payments are reported to the credit bureaus until the debt is satisfied. If the debt is settled for less than full payment, your credit report will negatively reflect that the creditor settled for less than 100%. This could mean years of negative reporting before your credit can start to recover. Additionally, and this is very important, you may receive a tax bill for any debt amount that was forgiven. The IRS calls this a "forgiven debt" and considers the savings as part of your income.
On the other hand, a Chapter 7 bankruptcy discharge takes around four months, start to finish. At the end the debt is discharged, and your credit report will state that the debt was "discharged in bankruptcy." Federal law dictates that the report of a bankruptcy is the last negative information that can be recorded on your credit file concerning a discharged debt. You can start rebuilding your credit immediately after your discharge and without the burden of unpaid debts. Also, there are no IRS ramifications for debts that are discharged in bankruptcy.
If you are considering bankruptcy to relieve you of financial difficulty, speak with a qualified and experienced bankruptcy attorney. Federal bankruptcy law offers powerful protection for people struggling with debt. Call today and learn how bankruptcy can quickly eliminate your debt.
Contact the experienced Chicago bankruptcy attorneys at Glanzer & Associates, P.C. at 1-312-644-2227 to discuss your specific situation, and to schedule your free, in-person consultation.