What Happens If You File for Bankruptcy?

Filing for bankruptcy can feel overwhelming, but it’s a legal process designed to help you get a fresh financial start. Understanding what happens after you file — and the consequences of doing it without the right guidance — can make all the difference in whether bankruptcy truly helps you or leaves you worse off.

Impact on Your Credit Score

One of the first things most people worry about is how bankruptcy will affect their credit score. Yes — your credit score will take a hit. A Chapter 7 bankruptcy can remain on your credit report for up to 10 years, while a Chapter 13 can remain for 7 years (source: Experian).

However, if you are already behind on payments, facing collection lawsuits, or have judgments against you, your score may already be significantly impacted. Bankruptcy stops the damage from getting worse and gives you a clear starting point to rebuild. Additionally, a handful of my client’s credit score actually go up when filing for bankruptcy because of the late activity.

Rebuilding your credit score can begin immediately after you file your bankruptcy case. Trying to save your score beforehand may be a wasted effort. Some people have stated they have gotten their credit score at 690 within 3 months after filing a chapter 7 bankruptcy.

Getting an FHA Mortgage After Bankruptcy

A common question is whether you’ll ever be able to buy a home after bankruptcy. The answer is yes — in fact, you can qualify for an FHA mortgage just two years after your Chapter 7 discharge if you meet other credit and income requirements (source: HUD).

This means that if you file bankruptcy today and take immediate steps to rebuild your credit, homeownership could be a reality in as little as 24 months.

Why Listening to Your Attorney Is Critical

Bankruptcy gives you a powerful legal tool: the discharge. This is the court order that wipes out your qualifying debts and gives you the fresh start the law was designed to provide.

But here’s the truth — simply filing isn’t enough. If you fail to follow your attorney’s guidance, miss deadlines, or don’t provide required documents, you risk having your case dismissed without a discharge. That means:

• You still get the bankruptcy on your credit report

• But you don’t get rid of your debts

That’s the worst of both worlds. Working closely with your bankruptcy attorney ensures you receive the discharge and the real benefit of filing.

You can contact our office here for guidance: www.bankruptcynearme.org/contact

Rebuilding Your Financial Future After Bankruptcy

Once your case is complete, your financial recovery starts. Here’s how to rebuild:

• Create a budget and stick to it (CFPB budgeting tool)

• Start an emergency fund, even if you begin with just $25 a month

• Make timely payments on any new or remaining obligations

• Monitor your credit report for errors (AnnualCreditReport.com)

• Open a Secured Credit Card with responsible use. Shop around, consider reward rates, annual fees, credit check requirements.

With consistent effort, many clients see their credit scores improve significantly within 1–2 years.

Alternatives to Bankruptcy — and Why Many Don’t Work

If you’re overwhelmed with debt, bankruptcy isn’t the only option. You could attempt to repay your debt on your own. But be very cautious of debt management plans, debt consolidation programs, and debt settlement companies.

These companies are not legal professionals — they’re salespeople. They often promise to help you avoid bankruptcy, but here’s what they don’t tell you:

• Their fees can be exorbitant — I’ve seen agreements with fees as high as 25% of the debt owed. For example, someone with $100,000 in debt was being charged $25,000 just in fees.

• You may not even have access to your original agreement.

• They will often take a large portion (if not all) of your payment before sending anything to creditors.

• Creditors can still sue you and garnish your wages if you’re late — and the law is not on your side here.

Unfortunately, many of my clients come to me after paying these companies for months or years, only to find themselves still in debt, facing lawsuits, and needing to file bankruptcy anyway.

Bankruptcy law exists to give you legal protection from creditors — something these companies simply cannot provide.