How does bankruptcy affect my credit?

It's not good. Bankruptcy will stay on your credit report for 10 years, much longer than most other negative credit. However, you will be eligible for a home mortgage within two years after getting your Chapter 7 discharge, and eligible for "normal" rates within four years. I personally know of folks with credit scores in the high 600s within four years after obtaining their Chapter 7 discharge.

But the "hit" that your credit score takes is not necessarily a net negative. The experts are very mixed in opinion. For one thing, you are probably recovering from credit abuse or a major negative event, and learning to live on a cash budget may be just what the financial doctor ordered. Furthermore, spending five years dodging creditors and fighting judgments and foreclosure are no good for your credit either. Finally, there is a credible argument that you are a better credit risk a few years after bankruptcy because you have been discharged of your prior debts and are not permitted to file another Chapter 7 for several years.

The opposing view is that bankruptcy nukes your credit score in the short term and makes you eligible for loans only with high interest. Those who argue there is little positive as to your credit in bankruptcy will suggest that only bankruptcy attorneys argue otherwise. This is plainly false.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.