Chapter 7 Bankruptcy and Your Credit

<< Chapter 7 Bankruptcy

How does Chapter 7 Bankruptcy affect my credit?

Many Debtors are surprised when they learn it is possible to actually have a higher credit score within one year after completion of a Chapter 7 bankruptcy than if they had not filed.  The truth is that bankruptcy is a negative reflection on your credit; however it is not the only factor creditors use when making a lending decision.  Some of the positive effects that you will experience upon completion of your bankruptcy are as follows: 

1. First, all of your eligible unsecured debt will be discharged. Therefore your debt to income ration will be much improved.
   
   
2. Second, the negative payment history that is being used against you when creditors making lending decision will be gone, and the line items on your credit report will show “Discharged in Bankruptcy.” Everyday that you put between the discharge of your case and the rest of your life, will continue to improve your credit score.
   
   
3. Third, by continuing to make payments on the secured debts that you have elected to keep, such as a house or car, will establish a positive payment history. Most of my clients experience the ability to purchase a new home or car within one year of their bankruptcy discharge. It is also common to receive credit card offers right after you are discharged. Much is made about the fact that the bankruptcy discharge will appear on your credit for up to ten years after your bankruptcy, but the fact that bankruptcy appears on your credit does not mean that you will not experience positive lending opportunities.