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Ask Dave

What Are the Long-Term Effects of Filing Bankruptcy?

Brittany asks what the long-term effects of declaring bankruptcy are.

QUESTION: Brittany on Facebook asks what the long-term effects of declaring bankruptcy are.

ANSWER: A Chapter 7 bankruptcy, which is when you drop an atom bomb on it and it’s a clean slate, stays on your credit bureau report for 10 years. A Chapter 13, which is a payment plan, and Chapter 11, another type of large bankruptcy or business bankruptcy, both stay on your credit bureau report for seven years.

The biggest problem with the bankruptcy is that. The second biggest problem is for the rest of your life—I filed 25 years ago, it’s not on my credit bureau report anymore—if you fill out an application—and it can be something as simple as trying to get a license for something—it may ask if you have ever filed bankruptcy. It doesn’t say, “Have you filed and it still shows up on your credit bureau report?” It says, “Have you ever filed?” So for the rest of my life, I get to say, one more time, yes. Well, what happened? Then you’ve got to explain it and how long ago it was and all of that. So it follows you for a long, long, long time. It is a scar psychologically and emotionally. It’s why I recommend you do everything you can to avoid it, but sometimes good people go there. I’m going to be your friend either way.