Bankruptcy & Credit

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Below we have provided answers to many of the common questions that we are asked by our clients regarding what happens to credit after a bankruptcy. If you would like more information please do not hesitate to call us at 508.655.5980 or e-mail us.

How will a bankrutpcy affect my credit?

Assuming your bankruptcy goes to discharge without objection and you receive your Order Discharging Debtor, you will now find yourself with the daunting task of rebuilding your credit, post-bankruptcy. A Bankruptcy appears on your credit report and will negatively impact your credit score. Because bankruptcy negatively impacts your credit, borrowing money may be more difficult, and when possible, may be more expensive.

What are the costs of a bankruptcy on my credit?

Negative credit will result in increased interest rates on credit cards and other loans. In addition there may be indirect costs associated with negative credit.

For example, assume that you have an old car and would like to trade it in for a new car, post-bankruptcy. You may find yourself unable to qualify for a car loan for some time after discharge, thereby incurring the increased maintenance costs and fuel costs of an old, inefficient vehicle for longer than originally anticipated. When you do qualify for a new car loan, the increased interest rate assessed to borrowers with negative marks on their credit score will cost you more in interest over the term of the loan.

Similarly, a borrower seeking to obtain a home loan may be required to pay "points" in addition to a higher interest rate, adding thousands of dollars in closing costs.

How long will a bankruptcy affect my credit?

A Chapter 7 bankruptcy filing remains on your credit report for 10 years after you receive your discharge, and individual debts discharged in bankruptcy remain on your credit report for 7 years following your discharge. A Chapter 13 Bankruptcy remains on your credit report for 7 years after filing. Whenever you apply for credit, a new loan, or undergo a background check, a previous bankruptcy will be visible to the loan officer, hiring manager or credit card company. This is only one factor, though, in making a decision about whether or not to file a bankruptcy and you should consider how your credit might be affected by your debts regardless of whether or not you file a bankruptcy.





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