You're thinking about a BK huh? Well, it will stigmatize your credit for at least a couple of years. Chapter 7 BKs will stay on your credit report for 10 years from the discharge date. Chapter 11 and 13 will stay on your report for 7 years from the satisfaction date. Some creditors will not want to do business with you at all until the BK falls off the report. Many lenders will do business with you after 2 years. Some lenders will do business with you right away. It is possible to have the BK deleted though the credit repair process.

What are your alternatives? You can continue to pay your bills and try to get back on top of your finances. Of course you will have to continue to pay interest on all of your outstanding debt. The interest payments alone might be too much for you to keep up with and let's face it, nobody likes to pay interest. So continuing to pay down your debt only makes sense if know that you can make headway on your debts and actually get the balances paid down.

Consumer credit counseling, debt management and/or debt counseling; these alternatives are not recommended. These types of companies might negotiate with your lender for easier terms in which to pay off your debt. The problem is, your creditors might still report you as being late if you are only making partial payments. They might also report you as being past due which can ruin your credit score just as much as the late payments. Even worse, sometimes the debt management companies will collect your money while your accounts go from late to charged off. When the account has been charged off by the creditor, the debt settlement company will make an offer to pay off the creditor at a fraction of the original debt.

The BK will damage your credit but it is a much better alternative to debt consolidation, debt management or debt counseling. BK might also be a better option than continuing to try to pay down high interest rate credit cards. That is something that you will have to analyze yourself.

***One very important note about BK.

If you decide to file BK, there will be two things that will happen that will hurt your credit score. The first one is obvious; the BK will actually show up on your credit report and reduce your credit score. The second is a bit less obvious; all of your open and active accounts might be closed through the BK. Every account that has a balance will probably be included in the BK. Through the BK process, all of those accounts will be closed. Since only open and active accounts can contribute positive points towards your credit score, you will have to re-build your credit from scratch...with a BK.

If you can, hold on to a few of your open accounts through the BK. Pick your oldest accounts and pay them off completely. This might allow you to salvage some of your credit so you don't have to start all over again. I've seen people with 720 credit scores 12 months after the BK because they had a few open and active accounts that they held on to through the BK.

Warm Regards,

Jack B. Olson

TrueCredit 3-Bureau Credit Report & Credit Score