Debunking Bankruptcy Myths: But Won’t Bankruptcy Ruin My Credit For Seven Years? | On your debt

This question, or some form of it, is asked by virtually everyone who comes to us to discuss their financial problems. The answer is generally straightforward. By the time they came to see us, their credit was already in bad shape! This does not necessarily mean that they have a bad credit rating. Some people manage to make minimum payments each month. Unfortunately, this is often done by taking cash advances on another card and / or by borrowing money from a payday loan store. But even in these cases, the poor person is hopelessly overworked and lives with a lot of stress.

The old myth that bankruptcy ruins a person’s credit for seven years seems to stem from the belief that a bankruptcy filing can be written on a person’s credit report for seven years. This belief is incorrect. A Chapter 7 bankruptcy filing can, in fact, be on a filer’s credit report for ten years from the date of filing. This does not mean, however, that a person has bad credit for ten years. Indeed, a bankruptcy discharge can often make it easier to obtain credit.

Has no sense? Well, think about it from a practical point of view. Let’s say you go to a banker to borrow money today. You have NEVER gone bankrupt. However, you’ve been a week or two late in paying your mortgage or car on several occasions. You have about $ 25,000 in credit card debt and have only been making minimum payments for a while. You can even have one or two payday loans. In other words, you barely get by. If the banker lends you money today, he will be competing with all of your other creditors for his loan. You barely have enough money to pay them. How are you going to pay off this new debt? In addition to this, the banker will have to consider the fact that you might declare bankruptcy on the other creditors and him after he has loaned you the money. The probability of receiving your loan is almost zero.

Fast forward a few months now. You have filed for Chapter 7 bankruptcy and received discharge of all your unsecured debt and now only have your car and house payments. Since that time, you have paid for your house and car on time every month. You have no other creditors. If the banker lends you money now, he will not be competing with other creditors. Plus, he won’t have to worry about your filing another Chapter 7 bankruptcy. You cannot re-file for eight years after filing the first bankruptcy. From this point of view, you run less risk now than before declaring bankruptcy and now your chances of receiving the loan are quite good!

If you doubt this logic, call the CFO at your local car dealership. You will likely learn that you may qualify for a car loan the day after your discharge from bankruptcy. Call a real estate agent. You will also learn that many people qualify for a mortgage within a few years of being discharged from bankruptcy.

Now, that doesn’t mean that bankruptcy is the best option for you. Bankruptcy should never be your first choice. If, however, you are struggling with debt, you should sit down with an experienced consumer bankruptcy lawyer and fully explore how bankruptcy will affect your credit.

Bond & Botes helps people with debt

At Bond & Botes, collectively, our offices across Alabama and Mississippi have helped over 100,000 individuals and married couples collect their debts over our 30 years of operation.

We are local and offer a free confidential face-to-face consultation. We also offer free consultations from the comfort and security of your home or office by phone and / or video with an experienced lawyer. Let us solve your financial problems. There is no obligation, and that means there is no downside to putting together the information you need to make good decisions on how to break the stress cycle of debt and move on. the front. We can answer all of your questions regarding Chapter 7 bankruptcy, Chapter 13 bankruptcy, stopping a foreclosure or wage garnishment, avoiding lien, stopping lawsuits, ” medical debt, personal loans, payday loans, credit card debt, etc. We can relieve your stress! We want to help you and we can help you!


Bond, Botes, Sykstus, Tanner & McNutt, PC

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Telephone: 256-760-1010 • Fax: 256-760-1023

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No statement is made that the quality of legal services to be provided is superior to the quality of legal services to be provided by other lawyers.

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