Unfortunately, there is no absolute answer to this question inasmuch as the decision to lend credit rests entirely with the lender. That being said, a quick look into the lending process will help you understand how creditors weigh bankruptcy in evaluating a borrower’s creditworthiness so that you can take appropriate action to rebuild your credit. At the outset, we would like to clarify the misconception that a bankruptcy filing prohibits debtors from obtaining credit for seven years. Though it is true that the filing is usually noted on your credit report ten years, each creditor makes its own independent assessment of your financial condition in deciding whether to extend you credit. Of course, a bankruptcy filing will likely be a factor that will be taken into consideration in making such a decision. However, other factors such as income and the value of collateral pledged to secure the loan are equally important in this evaluation process. Also important is your on-time history with regular monthly installment payments.

Here are some of our own observations that you may wish to consider in deciding whether bankruptcy is right for you:

1. We used to believe that a successfully completed Chapter 13 repayment plan had less negative impact on creditworthiness than a Chapter 7 liquidation case because creditors usually received some repayment on the debt obligation. However, because a debtor’s financial condition is monitored closely by the Court in Chapter 13 cases, debtors were usually unable to make a viable attempt at reestablishing credit until the case was over three (3) or five (5) years later. Alternatively, a Chapter 7 case is typically concluded within four (4) months, at which point emerging debtors can immediately begin reestablishing creditworthiness.  Moreover, creditors take comfort in the fact that an emerging Chapter 7 debtor cannot file another Chapter 7 case for eight (8) years and has few remaining debt obligations after the discharge.
2. In the long run, bankruptcy may also improve your ability to obtain credit. Bankruptcy allows you to wipe the slate clean and ultimately puts you in a financial position to eventually re-establish your credit. This may not otherwise be possible if your debts are so insurmountable that you are never able to repay them absent extraordinary circumstances.