When personal debts become impossible to manage, filing for bankruptcy might be your only choice for getting your finances under control again. There are multiple types of bankruptcy filing options, but Chapter 13 bankruptcy is often the best path for individuals who simply need to reorganize and repay their debts without liquidating assets.
Missouri citizens can file for bankruptcy by petitioning the bankruptcy court, though corporations and business partnerships cannot file for Chapter 13 bankruptcy. When you file, though, one important factor to consider is how Chapter 13 bankruptcy will affect your interest rates.
Will Chapter 13 bankruptcy lower your current interest rates?
Your chapter 13 bankruptcy plan may set the interest on any outstanding debts to a fixed rate. If you have an unpaid loan with a particularly high-interest rate, then the terms of your bankruptcy might cause that rate to lower for the duration of your repayment plan. This can make your remaining debts more manageable, giving you a better chance at achieving financial freedom.
Will Chapter 13 bankruptcy lead to higher interest rates?
While your existing interest rates may benefit from your bankruptcy status, be aware that future loans and credit cards may come with higher interest rates. Filing for bankruptcy can paint you as a risky borrower in the eyes of lenders and might lower your credit score by up to 200 points or more. Any lender can view your past bankruptcy on the public record, and it will remain on your credit report for up to 10 years.
Filing for bankruptcy is not a decision to make lightly. Choosing to do so can give you precious financial relief in the short-term, but may put you in another difficult situation down the road as your interest rates increase.