What Are The Long Term Effects of Chapter 7 or Chapter 13 Bankruptcy?

I get this questions a lot so here are the answers…


Stays On Credit for Ten Years

A Chapter 7 Bankruptcy or Chapter 13 Bankruptcy will stay on your credit for ten years.  This means that anytime someone access your credit report, they can see what Chapter you filed.  After ten years, it will no longer be seen.

A Chapter 13 Bankruptcy does look better than a Chapter 7 Bankruptcy simple because the creditor knows that you at least made an effort to pay off the debt.

Can’t File Another for Eight Years

If you file a Chapter 7, you will not be able to file another Chapter 7 for eight years.  However, if you file a Chapter 7, you can file a Chapter 13 after four years.  People often do this when they have homes.  For example, a person might file a Chapter 7 for their debt, they then fall behind on their mortgage payments.  They can wait four years and file a Chapter 13 so that they can get caught up on their mortgage.

Be very careful about taking new debt after a Chapter 7.  Creditors will be throwing credit cards at you because they know you are on the hook for at least eight years because you can’t file another Chapter 7.

Can Still Get a Home Loan

Just because you filed a Bankruptcy and just because it stays on there for ten years does not mean that you will not be able to obtain a home loan.  It is still possible!  For a Chapter 7, it’s best to wait two years.  For a Chapter 13, you can wait just one year.  Just keep in mind, the lower your down payment is, the higher your monthly payment will be.  Part of the reason is because lenders will not require mortgage insurance for low down payments or risky borrowers.  Mortgage insurance is basically insurance to protect the lender in case you default, the insurance will be used to pay the lender.



If you want further information, feel free to contact us for a free thirty minute consultation.  We can do it over the phone or in person, whichever you prefer.



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