Bankruptcy & Effects on Credit Reports

How will filing for personal bankruptcy impact my credit score?

An individual with great credit who files for bankruptcy will likely see a significant drop in his or her credit score. However, most individual bankruptcies are filed by people already having trouble paying their bills and are likely to already have negative items on their credit reports. Individuals with low credit scores when they filed for bankruptcy are likely to see a more modest drop in their scores as a result of filing for bankruptcy.

How long does bankruptcy stay on your credit report?

A Chapter 7 liquidation bankruptcy can appear on your credit report for up to 10 years. When an individual files for a Chapter 13 reorganization bankruptcy, it may appear on their credit report for up to seven years. When a debtor’s obligations to individual creditors are discharged in bankruptcy, those creditors may still file negative reports with the credit reporting agencies that may be reflected in your credit scores for up to seven years.

Will a business bankruptcy impact my company’s ability to get credit?

Most businesses may file for either a Chapter 7 liquidation bankruptcy or a Chapter 11 reorganization bankruptcy. Businesses filing for Chapter 7 bankruptcy must cease operations. Therefore the future creditworthiness of a business is only an issue for companies filing for Chapter 11 bankruptcy.

Chapter 11 bankruptcies are public records that may appear on your business’s credit report for up to 20 years. Business credit is subject to little regulation and each of the three major business credit reporting agencies will treat the bankruptcy differently when it comes to issuing credit scores for your business.

Will lenders give me a small business loan after filing for personal bankruptcy?

Yes, but it will be more difficult than it was prior to the bankruptcy because personal credit scores are usually a factor weighted by lenders making small business loans. However, some lenders will consider lending to businesses if there were mitigating circumstances surrounding the bankruptcy (such as a major accident or illness that left you unable to work). Likewise, lenders are more likely to overlook a personal bankruptcy if your business is earning enough income to repay the loan.

Will I be able to get credit or loans after filing for personal bankruptcy?

It may not be as difficult to get credit or loans after a bankruptcy as you might think, so long as you are willing to pay high interest rates or accept unfavorable terms. Some credit card companies will start sending high interest rate offers to individuals shortly after their debts have been discharged because it will be several years before they will be able to file for bankruptcy again. High interest rate auto loans secured by the vehicle may also be available shortly after discharge because the creditor can repossess it for failure to make payments. Finally, a debtor with a good income and a down payment may qualify for a home mortgage insured by the FHA before completing a Chapter 13 plan or two years after a Chapter 7 discharge. However, debtors will likely need to wait longer for non-FHA mortgages.

Can I keep my credit cards after filing for bankruptcy?

Debtors who file for bankruptcy are unable to pick which creditors will be paid during the bankruptcy process. Since credit card debt is unsecured and usually among the lowest-priority for repayment, credit card issuers are rarely repaid in the bankruptcy process. Therefore nearly all credit card issuers will close your account when you file for bankruptcy.

Additional questions about credit and bankruptcy?

Contact the experienced bankruptcy professionals at Thomas H. Curran Associates. The attorneys at Thomas H. Curran Associates have decades of experience in all types of bankruptcy proceedings and can answer any additional questions you may have about the impact of a bankruptcy on personal or business credit.