90 day late payment and bankruptcy - which is worse for your credit and bottom line
Q: Here is my situation, I owe $110,000 in unsecured debt. The year-old business went south and I don't have expected cash flow. Have not for the last 5 months. Now I have 90 day late payments on several credit cards. I am not sure of what to do next. I do not think my cash situation will get better any time soon. I have some means to at least bring those credit cards current, but it seems that a 90 day late payment is as damaging to credit report and score as bankruptcy. I don't want to file but still, should I at least consider it?
A: You sure should. But first of all, in terms of the damage that a 90 day late payment or even several will do to your credit report, you really can not compare it to what bankruptcy does. Simply put, 90 day Lates are not as bad to credit scores as bankruptcy. Bankruptcy is a public record, putting it in a whole separate category from charge-offs, debt collections and 90 day late payments. Chapter 7 stays on credit reports for 10 years and Chapter 13 for 7 years. And it will be much harder for you to seek additional credit if needed.
Chapter 7 will basically wipe all your debts off to give you a clean start. Chapter 13 is a repayment plan which provides for repayment of some or all of the debts out of future income over 3 to 5 years.
Sounds that you have a small business, then Chapter 11 bankruptcy could also be an option, under certain circumstances. With Chapter 11, you must, however, pay your creditor claims in whole or in part. So it is obvious, for your bottom line the Chapter 7 is much better choice, but you have to qualify to be able to file for it.
Now, instead of looking at only between bringing 90 day late payments current and filing for bankruptcy, you should also look at debt management plans, only with reputable companies. I will try to elaborate on debt management plans later.
Mon Oct 11, 2010 03:10PM | Copyright: www.bad-credit-advisor.com | More in Credit Score Help | Comments (0)
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