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How Does Chapter 7 Bankruptcy Affect Your Credit?

Known as straight bankruptcy, the primary purpose of filing Chapter 7 bankruptcy is to have the (debtor’s) debts discharged by liquidating the (debtor’s) assets in order to satisfy the (debtor’s) creditors.

A liquidation proceeding under Chapter 7 is the most common form of bankruptcy. This involves the sale of all the debtor’s assets that are not exempt. Exempt property may include your home, a car, clothing, work-related tools, and basic household items.

As part of Chapter 7 bankruptcy filing, the debtor is required to pass a means test. The bankruptcy discharge relieves the debtor’s after bankruptcy from having to pay many of your pre-bankruptcy debts. Below is a list of what Chapter 7 bankruptcy may or may not get rid of.

Chapter 7 bankruptcy may get rid of:

After you file chapter 7 and receive a discharge, the following debts may be discharged under the law:

Unsecured debts
Stop foreclosures,
Utility shut-offs,
Debt collection activities

Chapter 7 bankruptcy does not get rid of:
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After you file chapter 7 and receive a discharge, the following debts will still not be discharged under the law. You may still be responsible to pay:

Most taxes
Student loan obligations
Child support payments
Alimony payments
Fines, penalties, forfeitures, and criminal restitution obligations
Property settlement obligations /liens on property
Other debts that are not listed in your bankruptcy papers

Effects of Chapter 7 Bankruptcy on your Credit Score

Chapter 7 bankruptcy or any bankruptcy for that matter is considered a very negative event and will have a devastating effect on your credit score. A Chapter 7 bankruptcy filing is noted from the public records and will remain on your credit reports and affect your credit scores for 10 years from the filing date.

How long does negative information stay on your credit report?
Late payment
7 years
7 years
10 years
7 years
Charge off
7 years and 180 days

Credit Repair after Bankruptcy or Foreclosure
Credit Repair after Bankruptcy or Foreclosure

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