FAQ - Bankruptcy

Q1. Will I be able to get credit after filing for bankruptcy?

Answer:

There is no way to exactly predict the future. Bankruptcy is only one of the factors creditors use in determining whether to extend credit. Our experience is that most debtors can obtain credit at the conclusion of their bankruptcy, and, if they are diligent in making post bankruptcy payments, can reestablish an acceptable rating over time. Most debtors have found that when applying for credit soon after their bankruptcy, it is not so much a question of it credit is available, but a question of what interest rate will be charged. This statement, of course, must be qualified by current credit market conditions and the economy in general. Even so, most debtors will find that when applying for creditor soon after filing for bankruptcy, it is usually not a matter of whether they can get it, but what interest rate they will be charged.

Q2. Who will know that I have filed for bankruptcy?

Answer:

If you file a Chapter 7 bankruptcy, most likely, the only people who will ever find out are your creditors and bankruptcy case administrators. In a typical bankruptcy, the Court does not send out notices to your employer, your co-workers, your neighbors, or your family. If you file a Chapter 13 bankruptcy, however, a wage-withholding order is frequently issued to your employer. Although it is illegal for your employer to discriminate against you for filing, many people would prefer that their employer be unaware that they have filed. Depending upon which court presides over your Chapter 13 bankruptcy, you may have the option of asking for an automatic bank draft order (called an "ACH order").

Please note, however, that bankruptcies are part of the public record, and technically, anyone can look up who has filed bankruptcy, but as a practical matter, other than creditors performing credit checks--few people do. The record of your bankruptcy will remain on your credit report for seven years in a Chapter 13, and up to ten years in a Chapter 7.

Q3. How will filing for bankruptcy protection affect my credit rating?

Answer:

This depends on what your credit rating looks like now. If you have never been late on a payment, and currently have perfect credit, you rating will take a substantial hit. However, if you have had a vehicle repossessed, or a home foreclosed on, and have several 90 days past due notices on your account already, you will probably not see a big difference in your credit score. Unfortunately, there are three major credit reporting agencies, and they all use different and very complex formulas in determining your score. They do not reveal their formulas, and they are frequently adjusted, so there is no way you can figure out in advance how much your score will drop, but a good rule of thumb is, the better your score is now, the more of a hit it will receive. If you have already reached the point where obtaining credit is difficult, you will likely not see much difference.