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How long does a bankruptcy affect one’s record?

A bankruptcy filing will appear on an individual’s credit report, but not indefinitely. In addition, an individual is often able to obtain new lines of credit post-bankruptcy, although the interest rates may be higher. Even mortgage lenders may be willing to enter into agreements with individuals who have come through a Chapter 7.

In fact, an individual can also generally keep any wages and property acquisitions obtained after a Chapter 7 filing. The Chapter 7 filing date sets a bright line: creditors must cease their collection efforts pursuant to the Bankruptcy Code’s automatic stay, and the bankruptcy trustee will take an inventory of a debtor’s assets and obligations up to the filing date. 

It should also be noted that pre-bankruptcy defaults probably made an impact to one’s credit score anyway, arising from debts such as overdue credit card payments, medical bills, car loans, mortgages or other liabilities. It may be better to start rebuilding credit with a clean slate, rather than accumulate a history of defaults. 

As a law firm that has helped many clients struggling with debt management, we know that a Chapter 7 is not right for everyone. There is no threshold amount of debt required to be eligible to file for Chapter 7. However, the bankruptcy trustee might convert a Chapter 7 to a Chapter 13 if an individual has enough disposable income. If a debtor had been hoping to be free of his or her debts within a few months pursuant to a Chapter 7 discharge, the three to five year repayment plan provided by Chapter 13 will be a significant readjustment of timing. 

Source: FindLaw, “Pros and Cons of Declaring Bankruptcy under Chapter 13,” copyright 2015, Thomson Reuters

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  • NACA | National Association of Consumer Advocates
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Goldman & Beslow, LLC

Goldman & Beslow, LLC is a Federal Debt Relief Agency by an Act of Congress. We have proudly assisted consumers seeking relief under the U.S. Bankruptcy Code for over 38 years.

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