Chapter 7 Bankruptcy

When you file a chapter 7 bankruptcy it's a fresh start, complete liquidation bankruptcy for the most part. You would still have to pay your government backed student loans or any other money you owe government such as back taxes. (You still have to pay your child support too.)

Chapter 7 will show up under the public record portion of your credit report. It will remain on your credit report for 10 years from the date that you filed for bankruptcy. Then it can be purged.

You need to send a copy of your bankruptcy documents to the three credit bureaus so they can update your report to show which accounts were included in the bankruptcy. If you don't take this step, your credit report will not necessarily show that your past due and collection accounts were included in the bankruptcy and that will make it even harder on your credit scores.

From the date you file for chapter 7 until the date it's discharged usually takes a few months. Most are discharged in 3 months but I've seen some that took a few months longer. It will depend on your personal circumstances. But two years from the discharge date (not the filing date) you may be able to purchase a home.

There are currently two types of home loans that allow you to try to qualify this quickly. They are the FHA home loan and the VA home loan for veterans or active duty military. You will have to establish a new, good credit history in this two year waiting period to prove that your finances are back under control. You can't have anything else derogatory happen to your credit within this two year period. And of course you would have to show that you have a solid work history and enough income to support the proposed new house payment.

I read somewhere recently that "Capitalism without bankruptcy is like Christianity without hell." And that being true, there were more people who filed bankruptcy in America last year than those who filed in the entire decade of the 1960's!

While filing bankruptcy can be personally humiliating, it is no longer seen as the most horrible deadbeat thing a person can do. You will pay a price to be sure. After bankruptcy your consumer credit card rates and car loan interest rates will be much higher for the first few years than rates for those who have good credit.

With the economy the way it is and the increasing unemployment we can expect to see the bankruptcy filings increase as well. If you want to learn more about chapter 7 and other bankruptcies click the link.

http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/process.html