How will bankruptcy affect my credit?

For some people, a bankruptcy filing is the fastest, most effective way to rehabilitate their credit. A bankruptcy filing can remain on your credit report for up to 10 years.  However, banks understand that discharging your debt in bankruptcy usually enables you to stay current on living expenses and new loan obligations.  Banks also know that you are prevented from filing another bankruptcy for 8 years after receiving a Chapter 7 discharge. In the bank’s eyes, individuals once laden with debt are frequently a much better credit risk after having obtained a Discharge in bankruptcy.

Of course, a bankruptcy is not a favorable notation on one’s credit report. However, someone considering bankruptcy usually has a credit report that looks pretty bleak. Filing bankruptcy can give you a fresh start and enable you to begin rebuilding your credit. Right after obtaining your Discharge, if you are working or have other income, you may be able to obtain a credit card or even a car loan. Some of my clients have even bought their first home as little as a year after obtaining their Discharge. Many of these individuals would not have been able to obtain this credit without having rid themselves of their old debt by filing for bankruptcy.