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Will I ever be able to get a loan after Chapter 7 bankruptcy?

On Behalf of | Dec 7, 2023 | Chapter 7 Bankruptcy

Struggling with unmanageable debt is a nightmare, and if that is your everyday life, you likely are considering Chapter 7 bankruptcy. This legal process can allow you to discharge all of your unsecured debt. Imagine waking up one day without credit card debt, with zero medical bills, no personal loans and no collection calls from payday loan lenders.

However, you may also wonder how filing for Chapter 7 bankruptcy will affect your ability to get a loan or mortgage in the future. Indeed, this is fear of how bankruptcy will affect one’s future is the usual fear that holds those back that need bankruptcy protection the most.

What is Chapter 7 bankruptcy in Florida?

Chapter 7 bankruptcy requires you to sell non-exempt assets to pay off your creditors, but in exchange, all of your remaining unsecured debts are forgiven. Non-exempt assets mean those assets that are not protected by bankruptcy exemptions, but we have some of the most generous exemptions in the United States.

What are exempt assets?

Exempt assets are all of the assets that you can keep in bankruptcy. This includes your homestead, your personal car, retirement accounts, household goods and personal effects. Your specific exemption will depend on your marital status, the size of your family, income and any past bankruptcy filings.

Chapter 7 bankruptcy means test

To qualify for Chapter 7 bankruptcy in Florida, however, you must pass the means test. The means test compares your income to the median income of similarly situated households in Florida. If your income is below the median, you can file for Chapter 7 bankruptcy.

If your income is above the median, you may still be able to file for Chapter 7 bankruptcy if you can show that you do not have enough disposable income to pay back your debts over a five-year period. Otherwise, you would have to file for Chapter 13 bankruptcy.

How does it affect your credit score?

Filing for Chapter 7 bankruptcy will have an immediate negative impact on your credit score. This happens because the Chapter 7 bankruptcy shows up on your credit, and it shows that you did not pay back your debts as agreed.

However, while the negative impact is immediate and can be incredibly detrimental, bankruptcy’s impact diminishes over time as you rebuild your positive credit history, and it goes away after 10 years. This means that yes, over time, you can get another loan and mortgage.



Kingcade & Garcia | A Miami Law Firm