The Effects of Going Bankrupt

Quite a few Americans who are having a hard time keeping up with their bills see bankruptcy as an easy and quick method of getting out of debt. While there are certain times and situations where bankruptcy is in fact the only option, it's not a decision that should be made lightly once you've considered all of the pitfalls. Make sure you do your research first so you know what you're getting into.

Your Credit Report:

While you may have gotten rid of your high interest credit and department store cards, there's a good chance there will still be situations in which you'll need or want some sort of credit. Making big purchases like automobiles and houses, even apartment rentals all involve your credit, and there are few things that look worse on your credit report than a bankruptcy.

When a lender is contemplating whether or not to provide credit to a consumer, they will ordinarily look at the ability of that consumer to make regular payments based on three things;

  1. Their current income to debt difference,
  2. their financial stability,
  3. and their payment history.

With a bankruptcy noted on your report, your stability and history are not going to look good to anyone - so without a very good income in relation to your debt, it will be extremely difficult to acquire new credit.

Your credit reports can (and normally will) include information on your bankruptcy filing for up to 10 years after a discharge. While it is technically possible to get new credit after filing a Chapter 7 or 13, assuming your credit report is what your credit worthiness is based off, it will be extremely difficult if not impossible to do so. If and when you do begin to re-establish your credit, you'll find yourself paying "high-risk" interest rates on everything from credit cards to home loans until quite some time has passed.

Buying a Home:

While it is certainly not impossible to receive a home loan after a bankruptcy, it certainly is more difficult. Banks and other private lenders will put the consumer in a very high risk category unless the bankruptcy is years past and credit has been excellent since. Even then, it's difficult to get the same rates as someone with the same credit score and a clean financial past.

  1. FHA loans typically require the borrower has managed to establish at the least 2 other credit accounts since the bankruptcy, all of which must be kept in good standing. The borrower also needs to wait for a period of at least 2 years after Chapter 7's or 1 year after Chapter 13's.
  2. VA loans will normally require a minimum 2 year period of solid credit after discharge as well, though special circumstances may be considered.

If you're considering bankruptcy, then we strongly advise that you first speak with a bankruptcy attorney as soon as possible; as they will be able to explain the process and give you advice based on your unique situation. Clear Bankruptcy works with bankruptcy attorneys from all over the United States. Give Clear Bankruptcy a call at (866) 871-9556 or visit them at for a free consultation today.