What Really Happens To My Credit After Chapter 7 Bankruptcy?

Posted by Wesley Scott on September 10, 2020 at 2:26 PM
Wesley Scott

Out of all the questions we bankruptcy lawyers get, this is probably the #1 question asked most frequently. If you have high anxiety, like me, filing bankruptcy can conjure up some pretty bizarre images in your mind. I remember thinking before I was a bankruptcy lawyer that once you file bankruptcy the bankruptcy people would probably follow you in the grocery store and ask why are you buying steak? Ridiculous right? But it is not so ridiculous for those of us with high anxiety. These kind of crazy images come to our mind right off the bat.

Of course the bankruptcy process is not intrusive like that all. But folks may still think that a bankruptcy sort of means your credit life is over forever. This simply is not the case at all. In fact, I often argue that your credit profile, and often score too, are better once you receive a bankruptcy discharge. Why so? Because you have no debt after bankruptcy. Think about this for a moment. You are a lender and I walk into your bank wanting a loan from you for 50k. Trouble is I have 50k in credit card debt. Are you going to give me the loan knowing that I am already juggling 50k in credit card debt? Now fast forward; say I just received a bankruptcy discharge and no longer owe 50k in credit card debt and I cannot file bankruptcy again for 8 years. You going to lend me money now? Sure you would! You have no debt and cannot file again for 8 years! You see, your credit profile improves when you have no debt. Banks do not care whether you pay other banks, the bank wants to know are you going to pay us?

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