How Long Afterwards Will a Chapter 7 Bankruptcy Affect Me?

The rule is pretty straightforward that you can’t file a Chapter 7 bankruptcy if you have previously been discharged from a case filed within the previous eight years.  Note that it’s the filing date that is relevant, not the discharge date.

If you filed a Chapter 7 that was dismissed, rather than discharged, then you can file again, but there are some rules that guard against abuse.  Just to clarify, your goal if you file is to get a discharge of your debts, wiping the slate clean and giving you the intended fresh start.  A dismissal accomplishes nothing.  You will have spent time and money for no change in your status relative to your creditors.

As your Austin bankruptcy lawyer, I will guide you through the process to minimize the risk of a dismissal. A dismissal could result from filings that do not comply with the rules, e.g. the means test, or from your not having kept your income tax returns current, or not showing up for the required creditors meeting, or not taking the mandatory credit counseling courses.  I do my best to ask all the right questions during “intake” and to look for any oversights or surprises that might lead to a challenge by a creditor or your bankruptcy trustees.  Sometimes I see debts that clearly need to be resolved before a bankruptcy process is commenced or assets that are essentially personal but are held in legal entities that might reduce the protection of them that would normally be available under Chapter 7.  Suffice it to say that you have to be completely honest and forthcoming with me in order for me to be able to my job properly and get you to a discharge if you duly qualify.

A bankruptcy stays on your credit report for ten years from the date of filing.  If you have a dismissal and then re-file, you’ll start another ten-year clock and have two bankruptcies on your credit report.  That’s not good.  However, once you are discharged, you can rebuild your credit faster than you might expect.  Initially you may have to get a credit card from a company specializing in situations like yours, such as First Premier Bank.  You’ll get a low limit and pay high fees, but banks like this report to the credit bureaus and allow your good performance to start boosting your score.  The same is true with either redeeming a vehicle from a bank like US Bank or buying a new one from a car dealer whose financing source does report to the bureaus.  A “buy here, pay here” lot is not likely to do you any good in that respect.

If you are pristine in your payments to creditors after discharge, you will find that after 2 years you will qualify for an FHA loan on a home.  Even sooner than that you may be able to get another type of mortgage or other loans if your income is good and you can show that you’ve regained control of your financial affairs.  So, a bit of patience is required, but not too far down the road you may well have a better-than-average credit score and access to all the credit you need at fairly reasonable rates.  Yes, in the short term you’ll be punished by lenders willing to take high risks, but by reporting your timely payments they become your first step toward recovering your creditworthiness.  And, you can always pay them off with better alternatives when you become eligible.  

The bottom line is that if you are deserving of Chapter 7 relief, no matter what the cause of your difficulty, my goal is to get you to a successful discharge.  You can then set forth on a path where, even though the bankruptcy remains noted on your credit report for 10 years, you will see the negative effects fade away long before that many years pass.