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Since Your Bankruptcy Filing Will Remain on Your Credit Record for Up to Ten Years, How Will That Affect Your Future Finances?

A bankruptcy is a problematic item in your credit record, but often debtors who file already have a troublesome history. In one respect, bankruptcy may improve their records. Because Chapter 7 provides for a discharge of debts no more than once every six years, lenders know that a credit applicant who has just emerged from Chapter 7 cannot soon repeat the process.

Research in this area has produced mixed results. A study by the Credit Research Center at Purdue University found that about one-third of consumers who filed for bankruptcy had obtained lines of credit within three years of filing; one-half had obtained them within five years. However, the new credit itself may reflect the record of bankruptcy.

For example, if you might have been eligible for a bank card with a 14 percent rate before bankruptcy, the best card that you can get after bankruptcy might carry a rate of 20 percent-or you might have to rely on a card secured by a deposit that you make with the credit card issuer.

Family Legal Guide Copyright © 2000, 2002 American Bar Association