Function

• Chapter 13 bankruptcy is called reorganization bankruptcy because it lets you reorganize your debts into a more manageable about. After filing, you will repay of your debts over a period of three to five years. You should only file for Chapter 13 Bankruptcy if you have a steady income and will be able to pay off your debts after filing.
  
  

Credit Rating

• A Chapter 13 bankruptcy will be reported on your credit report for seven years from the date of filing. If you pay debts off in the requisite three to five years, the bankruptcy will disappear from your credit report two to four years after you are out of debt. If your bankruptcy case is dismissed by the court, it will stay on your credit report for seven years.
  
  

Effct on Credit Rating

• Filing for bankruptcy will hurt your credit rating. However, its effect on your credit score can begin to diminish once your bankruptcy case is discharged by the bankruptcy court. If after filing for bankruptcy you pay your bills on time and only use a small amount of your available credit, your credit score can bounce back. Credit agencies give more weight to two-year old bankruptcies than to six-year old bankruptcies, according to bankruptcylawnetwork.com.
  
  

Credit Mistakes

• After filing for bankruptcy, many people notice mistakes in their credit report. Accounts that were closed during the bankruptcy proceedings show up on the credit report as open and overdue. In this case, your credit takes a hit because of the bankruptcy and then takes a further hit because of these inaccuracies. You should contact the credit bureaus and ask that those accounts be properly reported or removed.
  
  

Credit Counselor

• Some believe that you can get a better credit rating by hiring a credit counselor instead of filing for Chapter 13 bankruptcy protection. This is not always true. In the long run, filing for Chapter 13 bankruptcy will cost you less money and allow you to rebuild your credit rating faster. If you're thinking of hiring a credit councilor, be careful. There has been widespread abuse by so-called non-profit credit counseling groups, reports bankruptcyaction.com.