How Long Will the Bankruptcy Stay On My

Credit?

For some people, the best way for them to improve their credit report is for the bankruptcy to show up. Why? Because it shows that they no longer owe all the debt that was keeping them up at night. Call me for a Free Consultation at 210-930-7000 and I’ll show you how you can get control of your debt and improve your credit worthiness.

Most people that come into my office for a Debt Consultation ask how long the bankruptcy will show up on their credit report. The answer to that is it will stay on your credit report for 7 to 10 years, but I have found that most people are really concerned with the BIGGER QUESTION which is: “When will I be able to buy/finance something again?” The simple answer is “You will be able to buy something on credit when you can afford the new payment, in addition to all your other debt payments and living expenses.”

 

The issue is credit worthiness, and it is best shown by the example of someone going on a car lot to look at a car to buy. What are the first two questions that the salesman will ask you? Most likely, you will be asked “How much can you pay as a down payment?” Then you will be asked “How much can you afford to pay monthly?” Suppose that you tell the salesman that you have no money for a down payment and you tell him that you have no room in your budget for a monthly payment. The salesman is going to tell you that you can look at all the cars that you want, but that he is going to go back into his air conditioned office because they cannot provide financing. But you then point out to him: “But you haven’t even looked at our credit report!” He will say: “I don’t need to, because you don’t have any money in your budget to repay the loan.”

 

You see, in the world of credit, CASH IS KING. The more cash you have, the more credit worthy you are. Credit worthiness is based in part on what shows on your credit report, but if you have perfect credit and no cash, you can forget getting approved for a new loan. This is why I tell people that you first have to get debt free, then you have to save some cash. The more you save, the better. Then you can examine your options.

 

Here’s another example of credit worthiness being the focus: If you are going to buy a house, the mortgage lender will require that your house payment be no greater than about 29% of your net income. If you clear that hurdle, then the lender will require that no more than about 40% of your income will be needed for the house payment, car payment, credit card payments and any other debt payments you have. Why? Because the issue is credit worthiness. Sure, the lender wants to see that you paid those other creditors in-full and on-time, but the lender also wants to make sure that you have enough money to pay him and everyone else.

 

A person can qualify for a new house or car approximately 12 to 24 months after the bankruptcy case is filed.  This depends on several things, however, such as current income, current living expenses, payment history, down payments, etc.  (Please remember that if you are in a Chapter 13, any new debt incurred while you are within the bankruptcy process must be approved be the Trustee's office.  Contact our office if you are considering incurring any new debt.)

 

Need Help Understanding All Your Options?

Want To See How Bankruptcy Might Benefit You?

Call 210-930-7000 To Schedule Your Free Debt Consultation.