I work in the bankruptcy niche, and I wanted to tweak your statements...

Chapter 13 bankruptcy is deleted from your credit report seven years from the discharge date, which comes 3 to 5 years after you file (because there's a 3 to 5 year payment plan). So if you measure from the filing date, Chapter 13 takes 7 + 3-to-5 years to come off your credit report, which is 10 to 12 years from the filing date.

Similarly, Chapter 7 bankruptcy is deleted 10 years from the discharge date. In a typical Chapter 7 bankruptcy, the debtor receives a discharge 4 months after filing. So your statement is actually quite close, but to be pedantic, it's 10.33 years from the filing date.

In my experience, most Chapter 7 filers can fully recover after about 2 years, provided they are able to make their payments on-time after the bankruptcy.

This is a lie that needs to die. Bankruptcy might get removed from your credit report, but the public court records never do. Anyone who does a credit check can (and will) search those public records.

Bankruptcy stays with you forever.

Some friends of mine declared bankruptcy a few years after the financial crisis due to their business failing. They eventually lost their home, but were able to save up some money by not paying their mortgage while their case was in processing). They rented a place for a few years, but after some time, like 2 or 3 years they were able to qualify for a new mortgage with apparently a decent enough rate and bought a house. They were also somehow able to decide which loans to declare bankruptcy on, so they kept their car loan for example.

I mean, I don't know that it is perfect, but I think the bankruptcy laws in the US are pretty decent at least.

I'm not saying bankruptcy is bad. It's a necessary escape hatch for the credit industry, and shouldn't have the stigma it does. maunder is absolutely right; the consumer credit industry in the US is nothing but predatory. Good for you if you haven't been bit yet, but their goal is to eat everyone. Whenever I see someone brag about their credit score all I see is a mouse begging for the cat's approval.

More and more you can't even opt out of consumer credit. I have attempted to opt out of it by not holding any credit, except I apparently need good credit to live somewhere, or a credit card to rent a car or do some kinds of money transfers.

Telling people they can file bankruptcy, "reset to 0", and have another chance to redeem themselves is bullshit. The only place it disappears from is your credit report, and implying that covers it is a brazen lie. It really doesn't. Fuck credit scores. What about the ability to get a job, or not live on the street? Having a bankruptcy from 30 years ago can negatively impact your ability to do either of those things.

The credit industry is so deluded that they think your credit report is all that matters, and that's how they want you to think. In reality, it's all that matters to them and they can't wait to get you back in the game.

> but their goal is to eat everyone

Their goal is to make money.

If you go them and say "I want to make a very unfavorable to myself deal, that will make you lots of money" then they'll say "Yes."

Caveat emptor by default, with specific exclusions for some worse cases, generally governs financial contracts in the US.

In other words, you have the right to agree to whatever you want to agree to. If you choose to use that power to blow your foot off... well, that can happen.

The contrary view is that the state has at least two jobs: to create an environment where you're in a position to turn down bad deals, and to prevent the very worst deals from being offered in the first place.

Really it is about whether the government's job is to forcibly not govern, or to get involved.

The former I'd agree with, the latter I'd question.

Because "very worst" (or even just "bad") deals is a loaded term. Why? For whom? When?

As discussed in this topic, a high-interest rate loan is a bad deal, unless it's the best option you have. Would no loan be better than that loan? Maybe. Should we take away someone's ability to make that decision? I'm not convinced.

At some point, the cost of freedom is freedom to fail. So it's always a balancing act between not making that failure hurt too much or too easy to inadvertently stumble into... and giving people autonomy.

You'd think engineers would understand that you can't optimize for everything at once.

> This means no one can even tell you were bankrupt after 7-10 years, which is pretty incredible feature for borrowers.

This is absolutely not true. The record of your bankruptcy lives in the public records of the bankruptcy court forever.

> no one can even tell you were bankrupt

For loans over a certain size (definitely anything mortgage size) there is no limit on the length of the credit report given to them. They may not care when it's been so long, but they can see it all.

I'm going to say I don't believe this is true. However, I don't know for sure, and I also don't know the magic words to google to verify or disprove this. Can anybody point me to info on the web, or some of those magic words?

I do not really know exactly how to cite US code correctly, so I will just get you close enough to do a text search:

Go here: https://www.law.cornell.edu/uscode/text/15/1681c

Search on that page for "Exempted Cases"

All of the language about how long negative information can be shown on a credit report is exempted when the loan principle is $150K or greater.

> This means no one can even tell you were bankrupt

Except the banks who loaned you money! There aren't that many banks, and credit reports aren't their only source of intelligence.

I'm always amazed at the number of people who recommend bankruptcy as, like, an investment or risk management tactic. It's a huge mess, and seven years is a long time.

It’s all relative. Seven years of not being able to utilize debt is better than 70 years payoff schedule where every cent of your disposable income is going to service a debt that you’re unable to really put a dent in and making real sacrifices along the way.

Creditors love people who have recently filled for bankruptcy. They're vulnerable, known to be bad with money, and can't file again for a number of years.

> Except the banks who loaned you money! There aren't that many banks, and credit reports aren't their only source of intelligence.

I don't think they have that info. It's not like you go take a walk down to your local bank and talk to a loan officer that grew up with you. It's a faceless nameless corporation that does very standard checks. They often don't even hold the debt. Trust me, they want to give you a loan and don't have their shit together enough to get unofficial credit history that they're not legally allowed to use.

American Express never forgets. 20+ years after declaring bankruptcy and I'm still not able to get an AmEx card, because they have their own records. (I have an 820+ FICO score.)

>American Express never forgets. 20+ years after declaring bankruptcy and I'm still not able to get an AmEx card, because they have their own records. (I have an 820+ FICO score.)

I can confirm this.

I'm 30+ years out from getting a couple thousand written off by Amex and 20+ years out from bankruptcy (a single "debtor" who was the plaintiff in a lawsuit against me, and during which no loans or credit cards were defaulted on) and American Express still won't do business with me, even after being their employee (and having to pay back every penny that was written off before they'd issue me a corporate card) for several years.

I'd also note that American Express does not report payment histories on their charge products to the credit bureaus. But they do have a very long memory.

Edit: I'd note that I still had a 700+ credit score within the 10 year window after bankruptcy, and my score is in the mid 800s.

I suspect Visa, MasterCard, and a number of other banks and credit unions would be keen to offer good loan conditions to a person with a demonstrated income and 800+ FICO score.

I'm not from the US so could you explain how credit unions deal with these things? Are they more sympathetic than banks or do they operate as banks-except-in-name?

For average needs a credit union is a bank with another name. They occasionally have better rates, because there isn't a profit motive for the credit union since it's member owned. If you have special needs beyond checking/savings and home/car loans a credit union may not be able to offer the same level of support as a bank. The quality of credit unions varies wildly, especially on the tech side.

7 years is not a long time to live without credit that that a person is shown to be unable to handle.

Being bankrupt is great if you are poor.

Most of the time banks don’t care. They just securitize the product package it into a bunch of complex instruments and sell them off to “investors”