Client Testimonials
My name is T. Jeffery and I have been a member over a year now. I just wanted to say thank you for all the hard work your organization has put in to repair my credit. When I first started last year, my FICO scores were in the mid 500s to lower 600s. As of June 15, 2007,...
Q & A - Questions and Answers
What is the difference between Chapter 7 and Chapter 13 Bankruptcy?
Chapter 7:
A complete dismissal of all debts that qualify for discharge. Most debts can be discharged (wiped clean) in a bankruptcy. There are some debts that don't qualify like child support, student loans, tax liens and fines incurred from criminal activity. There are stipulations on secured debt like homes and cars, but most often Chapter 7 filers get to keep these assets. Most filers opt for Chapter 7, but under the new bankruptcy laws, qualifying for a Chapter 7 has become very difficult and most filers will have to settle for a Chapter 13. The bankruptcy court decides, through a means test, whether or not you can afford to pay your debts (even if reduced) through a payment plan.
Chapter 13:
A re-organization of debts set on a payment plan. The filer pays debts down, at reduced rates, over a 3-5 year period. The amount the filer pays back is based on a means test. The IRS decides what the filer's living expenses should be and the remainder goes toward the debt. If any debt remains at the end of the payment period, it is discharged. A Chapter 13 shows more personal liability, but is still extremely negative because it proves that you could not fully pay off your debts. The reporting time starts at the beginning of the payment period. At the end of that period, when the remaining debts are discharged, a 7 year reporting period begins.
There are many "professionals" who maintain that a Chapter 13 is only reported for 7 years total. It is reported for 7 years after the debt has been discharged. They overlook the 3-5 year payment period prior to that. Section 605 of the FCRA (a-1) titled Requirements relating to info contained in consumer reports contains detailed information on reporting time for bankruptcy.
If even one payment is missed, then the bankruptcy could be dismissed (cancelled by the court) but it would still be reported for 7 years. Maybe that's where people get the idea that it may only be reported for 7 years.
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