Chapter 7 BK

Often times people are so far in debt that they can never repay their debt. At this point the best solution may be to file a Chapter 7 Bankruptcy. A Chapter 7 is very detrimental to your credit rating, but you are typically out of Bankruptcy in 6 months and you don't have to repay any debt. However the disadvantage is that this will show up on your credit report for 10 years from the date of filing your BK. With creditors starting to tighten their credit requirements, and you will be limited to certain types financing.

Many consumers can still obtain home loans after a chapter 7 discharge.

Although Chapter 7 bankruptcy will severely damage your credit rating, you need to determine what's worse - killing your credit with constant late payments and high debt, or by filing chapter 7 bankruptcy and getting rid of your debt.

Chapter 7 bankruptcy isn't intended to let you rack up debt and then get out of it without having to repay anything. It is there as an option to give you a fresh start. Unfortunately, many people don't see it that way, and get trapped in the cycle of racking up debt and then filing for bankruptcy. However, you can only file once every 7 years, so be sure that if this is your only option, you use it as a stepping stone to move on to a better financial future.

It is important to review your credit report after your BK 7 is discharged. Some credit holders don't report the debt as being cleared even after the discharge. You may have to update your credit information yourself by providing the court documents.

There are also a few lenders that will give you their highest grade (depending on your payment history on your mortgage) even 1 day after your discharge.

With the new Chapter 7 bankruptcy laws that went into effect in October 2005, it is much harder to qualify for Chapter 7. Many higher-income borrowers will be forced to file Chapter 13, which is a debt reorganization/repayment plan. Consumers have to attend financial counseling to help determine which bankruptcy they may file.

Your first step is to clean up your credit of errors and items that should be removed once you have discharged (completed) your bankruptcy. The credit agencies do a poor job of removing creditors that were included in the bankruptcy so you need to get these items off our remove asap. In addition, find a bankruptcy friendly bank and credit union and establish new credit with a secured credit card - this will boost your scores right away.

Despite that fact that you have filed chapter seven bankruptcy, you still can obtain a loan. Work with a mortgage broker to improve your credit and find the right loan program for your situation.

» DISCLAIMER: The information contained in this article on 'Chapter 7 BK' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.