Bankruptcy and Your Credit Score

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Bankruptcy and Your Credit Score
Understanding the Basics
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Bankruptcy Chapters
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An individual may file bankruptcy under chapter
7, 11, 12 or 13 of US Bankruptcy Code
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1
Chapter 11 Bankruptcy
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Typically used by small businesses
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2
Chapter 12 Bankruptcy
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Family farmers or fishermen
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Chapter 13 Bankruptcy
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• Wage earner plan
• Rarely used is a three to five year wage
  garnishment

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• Wage earner plan
• Is a three to five year wage garnishment

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Chapter 7 Bankruptcy
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Bankruptcy Timelines
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Not all bankruptcies are the same with regard to
time lines
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Credit ScoreDate of Filing Bankruptcy
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Almost all unsecured debts are discharged in a
Chapter 7 bankruptcy in 3 ½ months leaving you
able to work on paying bills and increasing the
credit score
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Most credit scores improve after Chapter 7
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Credit Score after Discharge
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A debtors credit score may actually increase
noticeably right after the bankruptcy is
discharged
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Long-Term Impact on Credit Score
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How bankruptcy impacts a debtors credit score in
the long run depends on a variety of factors
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Discharged debts will remain on report but show
as discharged
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Lenders place differing levels of importance on a
previous bankruptcy
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Debtor needs to have stable employment and
sufficient income
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Credit cards, car loans, and other types of
credit may be available during and after Chapter
7 discharge
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Mortgage Loans after Bankruptcy
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With a steady income, most individuals can apply
for an FHA loan within two years a chapter 7
discharge
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Depends on what type of bankruptcy filed
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Depends on what type of bankruptcy filed
Typically takes at least 2 years before debtor
can qualify for a mortgage after Chapter 7
discharge
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Debtor may qualify for FHA mortgage after one
year of payments in a chapter 13 or two years
after Chapter 7 discharge
Depends on what type of bankruptcy filed
Typically takes at least 2 years before debtor
can qualify for a mortgage after Chapter 7
discharge
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Credit after Bankruptcy
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Debtor should not shy away from all credit after
bankruptcy
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Be cautious and selective but apply for at least
one credit card after bankruptcy
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May need to obtain a secured credit card
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Use the card sparingly
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Pay it off each monthPay it off on time
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Ways to Improve Credit Score after Bankruptcy
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A debtor can take numerous steps to help increase
his or her credit score after a bankruptcy
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Want to Know More About Bankruptcy and Its Effect
on Your Credit Score?
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Get Your Bankruptcy Questions Answered
Click to visit centraltexasbankruptcy.com
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