How Long Will a Bankruptcy Affect My Credit?

How Long Will a Bankruptcy Filing Impact Your Credit?

If you have opted for bankruptcy as a way to get your finances under control, you may be wondering how long the bankruptcy filing will remain on your credit report, and how long it will have an impact on your ability to obtain credit.

How long the bankruptcy will actually appear on your credit report depends on the type of bankruptcy you filed. With Chapter 7 liquidation, where you permanently discharge debts, your credit report will reflect the bankruptcy filing for 10 years. With Chapter 13, though, where you agree to repay your creditors under new terms, the bankruptcy filing only shows up for seven years. There are some situations where the bankruptcy may stay on your credit record for a longer period. For example, if you apply for a loan in excess of $150,000, the potential lender may see the bankruptcy filing, even though it has been more than 10 years.

How to Minimize the Impact of a Bankruptcy on Your Ability to Obtain Credit

When a potential lender considers your creditworthiness, they will likely look at your credit report. In many instances, though, that will be only one of many factors. Many lenders are far more interested in what you have done lately, as opposed to what you did a number of years ago. If your credit report shows that you have made all payments in a timely manner since your bankruptcy, a lender may be inclined to extend credit, perceiving that you have developed new habits, or that the bankruptcy was the result of an illness, injury or other unforeseen incident, and not the result of poor money management.

The other important thing to do, if you want to improve your chances of getting credit, is to minimize the use of available credit. If you have a credit card, don’t use it unless absolutely necessary, and pay it off every month or as soon as possible.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

What is the Potential Impact of Misrepresentation in a Bankruptcy Proceeding?

When you are struggling to meet your financial obligations, and have sought bankruptcy protection, the temptation to falsify information can always be present. You may fear that the court won’t grant your petition, that you’ll again face the seemingly endless calls, letters and threats from creditors. Making false statements during a bankruptcy filing is bankruptcy fraud, however, and bankruptcy trustees take the abuse of the system very seriously. The bankruptcy laws provide trustees with specific tools to verify the validity of assertions made in a bankruptcy petition.

An Examination under Rule 2004

The trustee has the power to obtain testimony and even documents from the person filing for bankruptcy, as well as any other relevant party. Under Rule 2004, the trustee can investigate any matter that will potentially affect the administration of the bankruptcy estate, or the debtor’s right to permanently discharge debts. This includes an examination of financial documents, conduct, property or other items.

Filing an Adversary Proceeding

The trustee, the United States Trustee’s Office, or other creditors may file a lawsuit, known in bankruptcy as an “adversary proceeding.” The adversary proceeding may name anyone, not just creditors or debtors. The trustee can use the adversary proceeding to:

  • Recover property wrongfully seized by creditors
  • Establish an appropriate value for property misrepresented by a debtor
  • Set aside wrongful or fraudulent transfers designed to favor specific creditors, or to remove property from a bankruptcy estate
  • Require that debtors make hidden assets available to the trustee
  • Seek restitution for or recovery of property wrongfully taken by employees, officers, shareholders or others in a business bankruptcy
  • Deny or revoke discharge of debt where the debtor has intentionally hidden or transferred assets to avoid inclusion in the bankruptcy estate

The trustee can ask the court to issue an injunction, prohibiting any party from taking actions that will have a negative impact on the bankruptcy estate.

Criminal Sanctions for Bankruptcy Fraud

The trustee may refer a case to the FBI or to the U.S. Attorney’s office for investigation for criminal offenses. Potential charges can include the filing of a false petition, the filing of false claims, intentionally concealing assets, bribery or embezzlement.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.

Factors That May Cause Your Bankruptcy Petition to Be Dismissed

If you are struggling to meet your financial obligations and have considered filing for bankruptcy protection, or if you are already in bankruptcy, you need to be careful not to engage in activities that will cause the bankruptcy court to dismiss your petition. As long as the bankruptcy is in effect, your creditors cannot call, write or take legal action against you, but if the court dismisses the petition, you will lose all bankruptcy protection. Here are the reasons that a bankruptcy court will dismiss a petition:

  • You have filed a Chapter 7 bankruptcy, but you do not ‘pass’ the Means Test. When Congress revised the bankruptcy laws in 2005 they added a Means Test to determine whether you have the resources to repay creditors over time. If the Means Test says that you can pay something to your creditors, then you cannot receive a Chapter 7 discharge. In this case, you can convert to a Chapter 13 bankruptcy or dismiss your Chapter 7 bankruptcy. You have filed multiple bankruptcies.
  • You don’t provide your bankruptcy trustee with the documents that they need to review your case. Typically these documents are pay stubs, recent bank statements and tax returns.
  • You didn’t take a pre-bankruptcy credit counseling class. Before filing for bankruptcy most filers must take a one-hour credit counseling course. If you have not taken this.
  • You fail to show up at the meeting of creditors-The bankruptcy law requires that you attend the 341 meeting of creditors. If you fail to appear, your petition can be dismissed.
  • Your Chapter 13 plan is not feasible—If the bankruptcy court reviews your plan and determines that it is not realistic, your plan can be rejected and your case dismissed.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-759-6022 (toll free at 866-662-3191).

What is the Impact of Filing for Bankruptcy During a Divorce?

One of the unfortunate byproducts of divorce is the financial hardship that can affect one or both parties. You may fear that creditors will pursue you for debts incurred by your former spouse. You may have a house that you can’t afford, but that you can’t sell either. A bankruptcy filing may seem like the best way to protect yourself. Here are some issues to consider regarding the interrelationship of bankruptcy and divorce:

  • A bankruptcy petition will necessarily lead to delays—whether you or your ex-spouse file for bankruptcy protection, an automatic stay will go into effect. In addition to prohibiting your creditors from taking action to collect a debt from you, it will also delay the distribution of marital property. Even if you agree on the division of debts and assets, property won’t be permanently transferred until the bankruptcy proceeding is finalized. This can include retirement plan assets, as well as the proceeds from the sale of your house.
  • If one party files for bankruptcy, both may need/want to file—If your ex-spouse files for bankruptcy protection, and you don’t, any debts discharged will only be discharged with respect to your former spouse. You would remain liable for all joint debt..
  • A bankruptcy filing could increase child support or spousal support obligations—If you have significant debts discharged in a bankruptcy proceeding, you could lower your debt-to-income ratio to the extent that the court perceives that you can pay more support. The opposite may be true if you receive support. Discharging your debts may reduce your need for spousal support.

One additional caveat: alimony and child support obligations are not dischargeable in a bankruptcy proceeding. Whether you are the potential payor or the potential recipient, you want to take this into consideration and plan appropriately, which means that you need to speak with an attorney who specializes in these matters.

Contact John Hargrave and Associates

We have provided comprehensive counsel to individuals in and around Barrington, New Jersey, since 1977. To schedule a free initial consultation, contact our office by e-mail or call us at 856-547-6500.