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How Chapter 7 bankruptcy affects credit scores

For many Americans, the prospect of declaring bankruptcy can be even more daunting than facing insurmountable debt. As many Kentucky residents are probably aware, Chapter 7 bankruptcy is often portrayed as a "hail Mary" final effort to discharge debt before financial collapse. The reality is somewhat different, and depending on the unique situation of the debtor in question, bankruptcy can sometimes be the most financially responsible option. 

Chapter 7 bankruptcy is the most common kind used by individuals and businesses, wherein a thorough accounting is taken by a court-appointed trustee of the individual or company's assets and debts. Some of these unsecured debts can be discharged by the court, while others may require assets to be liquidated to pay down. This can help to reduce an existing debt total and sometimes even clear it altogether. 

It is important to note that while this has a detrimental effect on credit scores right out of the starting gate, the damage is not as far reaching as some people have been led to believe. There are a variety of ways to lessen the impact of a bankruptcy on a credit score, including pursuing small credit-building loans and paying all bills in full on time. Since a bankruptcy only stays on a credit score for up to ten years, there is plenty of time to make things better. 

Chapter 7 bankruptcy is undoubtedly an important and involved step to take in the pursuit of being debt free. Kentucky residents should not step blindly into this process, but instead seek out the support of an experienced bankruptcy attorney. Such a professional can help to dispel the myths about bankruptcy and give residents a better idea of what they can do to stay financially healthy during the process and into the future. 

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