Bankruptcy Is a Signal to Lenders
Bankruptcy is like a huge red X marking your credit report. It will be on there between 7 and 10 years and can ruin your financial reputation. However, your creditors will also know that you can't file for bankruptcy again for 7 years, so some of their concern about your ability to maintain payments will be removed because you will be ultimately responsible for any new debt you take on.
Chapter 7
Filing for Chapter 7 bankruptcy leaves a very negative mark on your credit report since it means you no longer owe any of your debts. It's essentially wiping the slate clean, which can make lenders uneasy if you apply for new lines of credit in the future. You definitely won't be able to obtain new credit for at least 1 year, though 2 years is more likely.
Chapter 13
Filing for Chapter 13 bankruptcy won't hurt your credit as badly because you will still be responsible for your debts. It is merely a reorganization of your debts and helps to change the amounts you have to pay a month and the length of time in which you have to pay. This shows creditors that you're willing to do the hard work it takes to fix your financial situation--you just needed a bit of help to get on the right track.
Opening New Accounts Will Be Difficult
Following a bankruptcy, you will have to wait between 1 and 2 years to apply for mortgage loans insured by the VA or FHA. However, it often takes much longer to be approved for standard consumer credit like credit cards and loans. The stain bankruptcy places on your credit will likely wane within a few years, but it will still be a factor for lenders when you try to open new accounts within the 10 years it remains in your record.
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