Buying A House After Chapter 7 Bankruptcy
If you had a bankruptcy discharged a year ago or more, you might be starting to get your finances back in order. Maybe youre even thinking about buying a house.
But theres a waiting period before you can take out a mortgage usually at least two years. And lenders will be looking closely at your credit score, credit reports, bankruptcy discharge details, and other factors to ensure you qualify.
Tread carefully after bankruptcy and take steps to improve your credit. With hard work and patience, youll eventually be able to get a home loan.
Be Cautious About Job
As lenders often factor in your job history when approving a loan, holding down a stable job and having consistent income can boost your chances of getting a loan. Thats because stable employment can make lenders look more favorably on your ability to pay your loans.
While switching jobs might be okay, having gaps in income might make you seem more like a risk to lenders.
Why this matters: When youre trying to land financing after bankruptcy, because your credit is shaky, youll want to make sure as many financial ducks are in a row as possible. Having consistent income and not job-hopping too much can help you look more favorable to lenders.
How to get started: When researching lenders, see if employment history plays a part in the decision-making process. If youre self-employed or side hustle, be prepared to provide additional income verification. The more documentation you can provide that shows your income is consistent, and better.
Rebuilding Your Credit Score
Many of the situations above are unavoidable, but as you work to rebuild your credit score, focus on #3 especially. This is a time to budget and conserve money.
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What Affects The Chapter 7 Bankruptcy Process
There are a lot of things that can affect how long Chapter 7 bankruptcy takes, some including court delays in the aftermath of the COVID-19 pandemic. But the biggest factor on how long your Chapter 7 bankruptcy case will take is you.
Cibik said things that commonly slow the process down include tardiness or noncompliance in getting the proper documentation to the trustee, as well as objection to discharge by creditors, too much income, excess equity in real estate, a pending inheritance, or outstanding lawsuit where the debtor is the plaintiff. Thats just to name a few things that could go wrong, he said.
Lyle Solomon, a bankruptcy attorney of Oak View Law Group in Sacramento, Calif, said the fact bankruptcy is complicated can cause issues. There is a lot of paperwork, things need to be filed in a timely and complete manner, he said. There are generally two things that can slow the process from the petitioners side: The speed at which they get me all of the information correctly if I dont have everything in time, this can force a rescheduling, which is typically a month or so. Also, the more assets you have slows things down, the courts have to assess your property and what should be sold and what should be kept. This can take months.
He said the worst delay is if a creditor doesnt believe the person filing should be eligible and files a lawsuit. This can delay your case by a year or more, Solomon said.
How Long Does A Chapter 7 Bankruptcy Stay On Your Credit Report
After you file for a Chapter 7 bankruptcy, it remains on your for up to ten years and youre allowed to discharge some or all of your debts. When you discharge your debts, a lender cant collect the debt and youre no longer responsible for repaying it.
If a discharged debt was reported as delinquent before you filed for bankruptcy, it will fall off of your credit report seven years from the date of delinquency. However, if a debt wasnt reported delinquent before you filed for bankruptcy, it will be removed seven years from the date you filed.
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How Does Bankruptcy Affect Your Credit Score
A bankruptcy can initially lower your credit score. However, it is not uncommon for people who have filed bankruptcy to start seeing offers for new credit shortly after filing for bankruptcy. Also, bankruptcy can help you get a fresh start financially and decrease the amount of your discretionary income that is used on debt repayment, which can be attractive to creditors.
Bankruptcy is handled by the federal Bankruptcy Court, which makes it a public record that can be listed on your credit reports. How long a bankruptcy stays on your credit report depends on whether you file Chapter 7 personal liquidation bankruptcy or Chapter 13 debt readjustment bankruptcy, as follows:
- A Chapter 7 bankruptcy will stay on your credit reports for up to 10 years.
- A Chapter 13 bankruptcy will stay on your credit reports for up to seven years.
As you may know, it takes three to five years to complete a Chapter 13 bankruptcy and less than a year to complete Chapter 7. Yet, the bankruptcy remains on your credit record as part of your financial history for years after the court agrees that you have satisfied your debts.
The good news is that while a bankruptcy remains on your credit report, its impact on your credit rating diminishes over time if you establish a record of paying your bills on time and being creditworthy.
How To File Chapter 7 Bankruptcy
The most important factor in filing Chapter 7 bankruptcy is finding an experienced bankruptcy attorney. Once you decide on an attorney, you can refer creditors to your lawyers office. Filing the petition will trigger an automatic stay, which means creditors cant pursue lawsuits, garnish your wages or contact you about your debts. Heres a potential timetable:
If youre qualified, it will take 4-6 months to complete the bankruptcy process.
Here are the steps you must take when filing for bankruptcy:
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How Do Chapter 7 And 13 Bankruptcy Affect My Credit
Its a question we hear often: How long does a Chapter 7 bankruptcy stay on a credit report?
A Chapter 7 bankruptcy will remain on your credit report for 10 years, but the real impact of a bankruptcy on your credit is not as simple or as harsh as one Q& A tells you. There are factors pertaining to your financial situation that need to be weighed and considered to determine whether bankruptcy is right for you and how a bankruptcy filing will affect your credit going forward.
Sasser Law Firm can provide you with knowledgeable advice about your legal options if you are considering bankruptcy. We proudly represent clients in the Triangle and across North Carolina. Contact us today to learn about your options for getting out of debt.
Early Removal Of A Bankruptcy From Your Credit Report
When you file for bankruptcy, it will appear on your credit history. Chapter 7 bankruptcy cases stay on your credit report for 10 years and Chapter 13 cases stay on for seven years. After this time passes, the bankruptcy should disappear from your credit report automatically.
Creditors are required by law to only report accurate information to credit bureaus. This requirement protects consumers from having any inaccurate information on their reports that would unfairly harm their credit. But this also prevents information from being removed when it is correct. So when you have a bankruptcy case on your credit report and itâs accurate, it canât be removed early.
That said, if the bankruptcy entry has incorrect information or has been wrongly entered, you have the right to dispute it. The Fair Credit Reporting Act gives you the legal right to dispute inaccuracies and errors on your credit report. If you challenge an entry and the agency that reported the entry canât defend it, then theyâre required to remove it.
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Chapter 7 Bankruptcy Timeline
The Chapter 7 bankruptcy process has many steps. Your obligation includes gathering information required by the court and the trustee, taking a credit counseling course, paying a filing fee, which sets the court process in motion, attending a meeting with creditors, and more. The judge could discharge your debt once all that happens.
Most cases follow the same basic timeline.
Normally, the process takes about four months, Cibik said. Once you file your Chapter 7 bankruptcy, the meeting of creditors with the Chapter 7 trustee is approximately 30-45 days later. Then, the court waits 60 days to see if any creditors object to your Chapter 7 bankruptcy. If no objection, it takes about another 15 days to close out the case and get your Chapter 7 discharge of debt.
Removing Errors From Your Credit Report
When you find errors on your credit history related to bankruptcy, you should dispute them immediately. You will need to reach out to any of the three credit reporting agencies that show incorrect information. You can contact these agencies online or by mail. Itâs best to do so by mail because the agenciesâ online forms frequently make you agree to clauses that prevent you from suing. Sending the dispute by mail also leaves a paper trail. The Consumer Financial Protection Bureau and Federal Trade Commission both have templates for writing the letter.
Your letter should include your personal information like your name, credit report number, date of birth, and address. Be sure to date the letter, so you know when the timeline starts to hear a response. You can include your Social Security number and driverâs license number, but these arenât required. Then include information related to the dispute such as:
The account number
The dates of the disputes
Which company is responsible for the dispute
A numbered list of items to correct
An explanation of all of the inaccuracies
A list of documents that you are using to support your claim.
If the credit bureau disagrees they still need to provide you an answer within the required time frame. But if they disagree, they wonât remove the information. Even so, you can ask to include a statement regarding the dispute on your future reports.
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Is Your Credit Rating Really Worth Stressing About
Are you current on all your debt payments? Yes? No? Maybe?
If youâre behind on any debt payments, your credit score could probably be better. So, rather than worrying about possibly making your already bad credit worse, think about how a bankruptcy discharge could help you build credit.
So, what happens to my credit score if I file bankruptcy?
Like all negative information reported to the credit bureaus, filing any type of bankruptcy will have a negative impact on your credit score. Since a bankruptcy filing is public record, they will find out, even if theyâre not directly notified by the bankruptcy court.
But, unlike other things that have a negative effect on your FICO score, a bankruptcy filing is often the first step to building a good credit score.
How Legal Counsel Can Help
Filing for bankruptcy can indeed give you a fresh start financially and in life in general, but the process is not that easy to navigate if you try to do it yourself.
If you opt for Chapter 13, you have to come up with a repayment plan that satisfies your creditors at a court-mandated meeting. If you opt for Chapter 7, you have to honestly prepare a list of debts and assets and make sure you meet the exemptions offered by Texas bankruptcy law. Even choosing between the two can be difficult.
If youre in the Rio Grande Valley area of Texas or McAllen, contact Oliva Law. We will assess your financial and personal situation, guide you toward the best course of action, and then stand by your side as you rebuild your life and finances through bankruptcy.
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Can Chapter 7 Bankruptcy Be Removed From My Credit Report Before 10 Years
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In a Nutshell
Chapter 7 bankruptcy stays on your credit report for 10 years. Thereâs no way to remove a bankruptcy filing from your credit report early if the information is accurate. Bankruptcy will hurt your credit at first, but the effect will lessen over time. And in the long term, it can help you get your financial life back on track.
Even though Chapter 7 bankruptcy may be a good long-term solution to your financial problems, it can create issues in the short term. One issue is that it stays on your credit report for 10 years, which can make future lenders wary of giving you a loan. This might make you desperate to find a solution, such as reaching out to credit repair companies to see if they can help. To save you some time, so long as the bankruptcy is completely accurate, it canât be removed from your credit report.
Though Chapter 7 may hold you back temporarily, there are many ways to improve your credit following a bankruptcy filing. This article walks you through how bankruptcy works and how to improve your credit.
Sawin & Shea Is Here To Help
No situation is completely straightforward, so dont try to maneuver the intricacies of Indianas bankruptcy codes on your own. At Sawin & Shea, LLC, we understand that hiring an attorney to help you file bankruptcy is scary. We are committed to providing compassionate and non-judgmental representation to all of our clients. Our attorneys have helped thousands of people just like you get the fresh start they deserve. We are here to help.
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When Is Chapter 7 Bankruptcy Removed From Your Credit Report
Chapter 7 bankruptcy is the most common and simplest type of bankruptcy protection for individuals. It is often referred to as liquidation bankruptcy, which means that assets are often sold to pay secured debt to creditors. Chapter 7 is also sometimes used by small businesses. After liquidating assets to pay secured debt, most or all of your unsecured debt is discharged. This includes credit cards, personal loans, department store credit, and other similar debt. Student loans, alimony and child support typically cannot be eliminated through bankruptcy.
Typically, a Chapter 7 bankruptcy can be completed within a few months. After your bankruptcy hearing, the Chapter 7 is then discharged. This bankruptcy will stay on your credit record up to 10 years from the date of bankruptcy filing.
Which One Should I Choose
Chapter 7 is, by far, the more popular form because its cheaper, quicker and effective at relieving responsibility for debt if you qualify! And thats a big if. You must pass a means test, meaning your disposable income is under the median income in your state. If you dont qualify for Chapter 7, you can always fall back on Chapter 13.
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Breaking The Cycle Of Debt Gives You A Chance To Make Positive Changes
Many people worry about filing for bankruptcy in Wisconsin because of what it will do to their credit score. Both Chapter 7 and Chapter 13 bankruptcy remain on your credit report for about ten years. Naturally, creditors dont love seeing bankruptcy on a credit report, but any actual damage depends largely on your credit score before you filed.
If your credit was already poor due to a high debt-to-asset ratio and account delinquency, claiming bankruptcy will lower your score.
But since it is already low, there wont be a drastic drop. However, if you have a good credit score when you claim bankruptcy, you will see a much bigger drop immediately after filing.
Milwaukee area bankruptcy lawyer Steven R. McDonald provides a free consultation and helps you decide if filing bankruptcy is right for you.
Bankruptcy Reporting On A Credit Report
Most negative entries, like slow payments and charge offs, will disappear from your report after seven years. It works a bit differently for bankruptcy filings and depends on the particular chapter.
- Chapter 7 bankruptcy. The fact that you filed a Chapter 7 bankruptcy will stay on your credit report for up to ten years. At the ten year mark, the credit bureaus should stop reporting the bankruptcy.
- Chapter 13 bankruptcy. In this chapter, the filer pays into a repayment plan for three to five years. The Chapter 13 bankruptcy filing appears on a credit report for seven years from the filing date, which is only two years beyond the longest repayment plan. This benefit serves as an incentive to filers to choose the repayment option and to repay creditors something over time.
The immediate effect of bankruptcy on your credit score will depend on whether you initially had a high or a low score, and, in most cases, a higher initial score will take a bigger hit. The exact effect is hard to predict because scoring companies keep the formulas used to calculate scores somewhat secret. However, if you’re diligent, it’s not impossible for you to reach a credit score in the 700s just two or three years after you file your Chapter 7 matter.
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