Credit Reports After Filing Bankruptcy

Chapter 7 bankruptcy can be reported by credit reporting agencies for up to 10 years. This does NOT mean you will not be able to finance anything for ten years. Obtaining credit is based on many factors including:

  • Income
  • How long on the job
  • Type of income (W-2 versus 1099 or self-employed)
  • How much income you have to pay existing debt (debt to income ratio)
  • Payment history, including late payments and charge-offs
  • Negative public record reports, such as bankruptcy and judgments

Once you receive your Chapter 7 discharge, all discharged debt should be reported as “0 (zero) balance – account included in bankruptcy.” This means you no longer are obligated to pay on this account. This means going forward the account is no longer reported as past due or delinquent. In addition, the account no longer counts on the debt to income ratio. With each month that passes after the discharge, you have another month of positive reporting which usually helps increase your credit score.

After filing bankruptcy, you will need to take positive action to increase your credit score. Pay all secured debt, such as your home loan or car loan on time and never late. Taking out one new credit card and paying it off each month may also help rebuild your credit history.

Financing a Vehicle

Assuming you have the income and job history, most people are able to quickly finance a vehicle after filing bankruptcy.

Financing a Home

Financing a home after bankruptcy will require a wait. How long will depend on the type of loan you qualify for. FHA currently has a two-year wait to approve a home loan. The VA has about a one-year wait depending on the reason for filing bankruptcy. Conventional loans from a local bank have the most flexibility. Several of our clients in active Chapter 13 bankruptcy have financed or refinanced home loans with local banks while in bankruptcy. This is unusual though and not a regular occurrence. Strong income and job history are very important.

Watch Videos About Bankruptcy

The United States Courts offer a series of bankruptcy videos called “Bankruptcy Basics” that provide information about the bankruptcy process.