Tennessee residents who are struggling to pay their bills are sometimes reluctant to file for bankruptcy because of fears over what it could do to their credit scores. A Chapter 7 bankruptcy will remain on credit reports for up to 10 years and a Chapter 13 bankruptcy will appear for up to seven years, but that does not mean scores will remain low. Credit scores generally fall when a bankruptcy is filed and then begin to increase after it has been discharged.

Most people try to cope with unmanageable financial situations for months or even years before seeking debt relief, which means that late payments and collection accounts will likely have been reported to the credit rating agencies long before their bankruptcy paperwork is even submitted. Once a bankruptcy has been discharged, no more late payments will be reported and credit scores will usually improve.

It is also important to remember that lenders consider more than just credit scores when evaluating loan or credit card applications. The applicant’s debt-to-income ratio is also important, and this is a figure that will usually improve significantly following a bankruptcy. This is because the obligations discharged in a bankruptcy and the monthly payments associated with them will no longer be included in debt ratio calculations.

It may be wise for individuals in financial difficulties to take action sooner rather than later if they are worried about long-term damage to their credit ratings as these situations tend to get worse as time passes. Attorneys with experience in this area could help individuals to start down the road toward a fresh start by preparing Chapter 7 or Chapter 13 bankruptcy paperwork on their behalf. Attorneys could also clear up the many misconceptions about debt relief and explain how bankruptcy differs from the other available options.