What Happens After Chapter 7 Bankruptcy?

Fresh StartMy clients often ask me what happens after Chapter 7 bankruptcy.  Completing a bankruptcy case can be a life-altering event.  For example, once the case is completed the debtor will most likely start receiving offers to obtain credit card debt.  There are several reasons that recently discharged bankruptcy debtors make good borrowers.  First, they recently discharged all their debt and most likely have disposable income.  Second, they can’t file Chapter 7 bankruptcy again for eight years, so the creditor knows that they will have at least eight years to collect the debt.  However, debtors should be careful not to incur too much debt after discharge or they could find themselves needing to file bankruptcy again but ineligible for discharge.

Debtors recently out of bankruptcy may also find that their credit score starts to improve.  They have no debt so their debt to income ratio is much better than before filing.  In addition, if they are paying their bills on time since receiving a discharge then they are establishing a positive payment history.  Recently discharged debtors who do not incur additional debt after discharge and pay their bills on time can expect their credit score to improve fifty to one-hundred points during the first year.

Debtors who complete a Chapter 7 bankruptcy usually have to wait a few years before purchasing a home.  Depending on the lender this waiting period is approximately two years.  However, debtors can usually purchase a vehicle right away, assuming that they have income to support the monthly payment.  It may be in the debtor’s best interest to wait a few years before financing any large purchases.  Allowing time to pass after discharge can allow the debtor’s credit score to improve and as a result when the debtor finances his next vehicle or home he may get a better interest rate.

For more information about filing Chapter 7 bankruptcy contact a Texas bankruptcy lawyer.