Making the decision to declare bankruptcy is never an easy one. You may wonder if you can ever repair your credit. However, after a difficult financial period the decision to declare bankruptcy can also be a necessary one. If you have made that decision you may be wondering how you can repair your credit score. Much of this depends on the type of bankruptcy you end up declaring. In the United States you can file for Chapter 7 or Chapter 13 bankruptcy. You will learn a little bit about the difference between the two types and how they can affect your credit score in different ways. If you want to know more about this topic, you can read the tips and guide below.

Chapter 7 bankruptcy, known as \”clean slate\” bankruptcy, removes almost all your debts. However, the court has the right to seize some of your possessions to discharge your bills. The following items are safe from seizure:

* Up to $22,975 of equity in your home. This is known as the homestead exception.

* Insurance policies

* Retirement plans.

* Personal belongings, with a limit of $1000 on jewelry.

* Tools used in your job.

To rebuild your credit rating you do have to prove that you can use credit responsibly. So while you may never want to touch another credit card again there are still debts, such as student loans, that cannot be discharged through bankruptcy. Paying on loans such as these shows financial institutions and credit reporting agencies that you are serious about rebuilding your financial image. Other debt that is not discharged includes:

* Student loans

* Taxes and other governmental fees

* Child or spousal support

* Current utilities

* Rent, HOA fees, and other lease payments

Chapter 7 bankruptcy also has a more negative impact on your credit score in the long run because you do not have the opportunity to pay back any of your debts.

Chapter 13 bankruptcy is slightly different. Your debts are paid back in full or partially over a period of three to five years and delinquent accounts are removed from your credit report after seven years. The court determines how much you can repay, based on your income. You will also lose none of your property if you file Chapter 13 because you are repaying your debts. Chapter 13 bankruptcy also has a less serious effect on your credit because you continue to pay on your debts over the time period that the court determines. There is also some flexibility in Chapter 13 bankruptcy should any kind of financial hardship occur while you are in the repayment phase.

Rebuilding credit following bankruptcy is similar to rebuilding your credit following less serious financial disasters. Using credit responsibly (you may want to consider a pre-paid credit card), paying your other bills on time, and addressing any errors on your credit report are the most effective ways to boost your score and restore your credibility with financial institutions and credit reporting companies. A credit repair counselor can talk to you more specifically about the best options for you, both before and after the decision to declare bankruptcy.

Are you looking for more information regarding Repairing Credit? Visit http://www.thecreditjourney.com today!

Are you looking for more information regarding Repairing Credit? Visit http://www.thecreditjourney.com today!

Author Bio: Are you looking for more information regarding Repairing Credit? Visit http://www.thecreditjourney.com today!

Category: Finances
Keywords: declare bankruptcy,credit score