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Credit Repair Drill

Credit Repair Drill

Putting your credit pieces back together

Chapter 7 bankruptcy – How it affects your credit

Obtaining Credit after Chapter 7 bankruptcy

The primary reason for declaring bankruptcy is to get a fresh start by liquidating assets to pay your debts. The results of Personal bankruptcy however are long-lasting and far-reaching, that's why it is considered the debt management option of last resort.

Chapter 7, known as straight bankruptcy, involves the sale of all assets that are not exempt. In Chapter 7 bankruptcy a court-appointed trustee is appointed to takeover your property. Some of your property of value will be sold by a trustee or turned into money to pay your creditors.

Exempt property may include some personal items like cars, work-related tools, basic household furnishings and possibly real estate depending on the applicable laws. The new bankruptcy laws have changed the time period during which you can receive a discharge through Chapter 7. You now must wait eight years after receiving a discharge in Chapter 7 before you can file again under that chapter.

Chapter 7 bankruptcy may get rid of:
Unsecured debts
Stop foreclosures,
Repossessions,
Garnishments,
Utility shut-offs,
Debt collection activities and
May provide exemptions that allow you to keep certain assets (exemption amounts vary by state).

Chapter 7 bankruptcy does not:
Erase child support,
Alimony,
Fines,
Taxes, and
Student loan obligations.

Chapter 7 Bankruptcy Scenario One:

Filed Bankruptcy Chapter 7 and not yet received discharge


Do you have bankruptcy on your report?
What type of bankruptcy did you file? Chapter 7
Are all accounts in bankruptcy listed under "Included in bankruptcy" section on your report?
Are you still in bankruptcy?

Suggestion:

1. Keep making on-time payments on debts not included in bankruptcy.
2. File reaffirmation with the court and start paying some of the debts included in bankruptcy.
3. Get a copy of your credit report a month or 2 after getting Discharge Order from the court and check the status of all accounts.
4. You will have to wait till you get the discharge from court.
Chapter 7 Bankruptcy Scenario Two:

Filed Bankruptcy Chapter 7 and received the Discharge Order


Do you have bankruptcy on your report?
What type of bankruptcy did you file? Chapter 7
Are all accounts in Bk listed under "Included in Bk" section on your report?
Are you still in bankruptcy?

Suggestion:

1. Get a copy of your credit report a month or 2 after getting Discharge Order from the court and ensure that accounts in bankruptcy show $0 balance.
2. Notify the CRA/creditor if any account in Bk is reported as past due and get it removed.
3. Get a secured card and make sure the card provider reports payment history to the CRA.
4. After a year or 18 months of on-time payment, apply for unsecured credit card/store card.
5. Be an authorized user on someone else's credit card. The account history will be shown on your credit report.
6. Get a small personal loan or car loan and make on-time payments.
7. If 2 years have passed from discharge, you may get FHA loans. For conventional loans, you'll have to wait till 4 years after discharge.
Understanding Credit
DIY Credit Repair
Negative Items

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Chapter 13 Bankruptcy

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How long negative information stays on your Credit Report


Chapter 7 bankruptcy: 10 years

Charged off accounts: 7 years

Late payments: 7 years

Collection accounts: 7 years

Civil judgments: 7 years

Chapter 13 bankruptcy: 7 years

Inquires: 2 years
Tip of the day!