Chapter 7: How Does It Affect My Finances?
Bankruptcy is usually the last resort when you need to remedy a dire financial situation. The most common type of bankruptcy is Chapter 7. Given that it clears your debt, it enables you to get a fresh start.
At first, you might dread the thought of filing bankruptcy as it may seem like venturing into the unknown. But fear no more! Your reliable bankruptcy attorney in La Mesa will shed light on Chapter 7 consequences and guide you through the whole process.
To prevent any surprises down the line, go through our relevant questions for your bankruptcy attorney, top tips for hiring the right bankruptcy lawyer, as well as Chapter 13 basics.
How long does Chapter 7 stay on credit?
One of the most notorious outcomes of bankruptcy is its effect on your credit score. In this case, the fact that you filed a Chapter 7 will remain in your credit report for 10 years. Upon filing, your score will drop by a number of points depending on the state of your credit score before the proceedings. In general, the better your credit score prior to the filing, the larger the drop. Additionally, if you happen to have multiple accounts involved in the bankruptcy process, even more points will be subtracted.
After 10 years, Chapter 7 should automatically disappear from your credit report. However, make sure to check if that is the case. Should Chapter 7 still be present, you are entitled to dispute your credit report and have it reviewed.
How long does it take to rebuild credit after Chapter 7?
Even though it takes 10 years for Chapter 7 to fall off, you can start rebuilding your credit immediately after receiving a discharge. For example, if there was a series of inappropriate actions that led to debt accumulation, filing bankruptcy will mean that you are actively trying to improve your situation. This will have a positive impact on your credit score and add a lot of points to it. You can use several other instruments to rebuild your credit:
This card is covered by the deposit you pay. The deposit also serves as your credit limit and the card usually comes with high annual rates. Therefore, you shouldn’t plan to use the card for very long. Keep it until you are eligible for an unsecured one.
For this one, you will need a family member or a friend with a sound credit history who has full confidence in you. Your co-signer would take on a huge responsibility and if you fail to repay the loan on your own, the burden will fall on your partner. Do all in your power to avoid this because it could have a crippling effect on the relationship between you and the co-signer.
If the previous method sounds too daunting, asking someone to let you use their credit card might make more sense. Just be sure that the payments you make can be checked by credit bureaus so that your credit score gets a higher rating.
How long do I have to wait to buy a house after filing Chapter 7?
While you might think that filing bankruptcy ruins your chances of buying a house, it’s actually not that severe. You will probably have to apply for a loan, but only after a certain period of time. There are different types of loans you will be able to take out:
- FHA loans: This one can be granted two years after the debt discharge. Your credit score will determine whether or not you meet the minimum requirements.
- VA loans: This type is particularly favorable for active military members and veterans. The waiting period is also two years.
- Conventional loans: The rules for granting conventional loans are a bit more stringent and you need to wait at least four years before applying for one.
See your trusted bankruptcy attorney in La Mesa to get back on track
Today’s market is so volatile that a financial crisis could hit you at any time. One day, you’re planning a two-week family vacation, the next day, you’re struggling to pay the bills. Before you know it, there’s no other option but to declare bankruptcy.
Handling the process by yourself would bring about even more problems, so your best bet is to hire seasoned Chang & Diamond bankruptcy attorneys. Our expertise in the field will help you overcome any obstacles that may arise.
Once we restore order to your finances, your money will again be there to provide satisfaction. Take your kids to Belmont Park for as many roller coaster rides as they like. Chang & Diamond have got your back. Contact us now!