Credit Score News, Tips & Advice
Website CertifiedPrivacy Protected
Credit Score News, Tips & Advice « Credit Scores > Credit Score News > Lawyer Talks about Bankruptcy and Credit Score

Lawyer Talks about Bankruptcy and Credit Score

By Sally Maison
Published: Monday, November 9th, 2009

With bankruptcy filings growing by double digits in Colorado, a local lawyer was prompted to explain about bankruptcy and its effects on the financial lives of consumers. Additionally, he warned consumers how much going bankrupt hurts a credit score, which is a very important number for every American.

Lawyer Talks about Bankruptcy and Credit ScoreJohn Turner, a local lawyer in Colorado Springs, noted that the bankruptcy situation of consumers in the area is almost overwhelming. The bankruptcy numbers tell the lawyer’s story.

The District of Colorado’s bankruptcy court recorded an 88 percent spike from 2007 in Colorado Springs and southeastern Colorado. Additionally, 3,721 filings were already made in the same area as of September this year.

The lawyer explained that there are many people who went bankrupt because of uncontrollable factors such as divorce, death in the family, and medical bills. However, he cited problems in the housing market as the primary cause for the additional increase over the last two years.
Homeowners and construction workers who had great prospects in 2007 suddenly found themselves with nothing to build after the mortgage crisis in 2008. Homeowners, for their part, saw the value of their property plunge last year. A huge number of them reported that they owe more on mortgages than the current value of their homes. Workers were also laid because of the lack of projects.

Turner says people going bankrupt is an indicator of a slow economy, adding that clients who go to him have no other option but to give up their debts.

He notes that most people who go to him are confused whether to file for Chapter 7 or Chapter 13. He says most people file for Chapter 7, which permanently discharges a person from all his debts once the court approves his petition. Chapter 13, he explains, is just a temporary discharge from debts, and requires a person to finish his obligations once he has already improved his financial standings.

Turner adds that a new law was enacted in 2005 which restricts wealthier people from filing for Chapter 7, automatically disqualifying a number of people. He lawyer advises consumers who are late on their house payments to choose Chapter 13, which gives a person a lot more time to catch up with his mortgage payments. He explains Chapter 7 discharges all debts but it requires a person to be current with his mortgages before filing for one. He continued that while both bankruptcies hurt a person’s credit score, Chapter 13 is considered by most lenders as a better option.

Turner concluded that bankruptcy hurts a credit score badly but it does not much have of an impact after three or four years.

No Comments

No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.