Credit

There are two main types of personal bankruptcy:  Chapter 7 and Chapter 13.  

Chapter 7 Balance Sheet Bankruptcy. 

Most eligible petitioners for this type of bankruptcy have more debt than they do assets. When discharged, a Chapter 7 Bankruptcy eliminates all debts included, and the petitioner walks away clean. 

Chapter 13 Restructuring and Repayment Bankruptcy.  The main reason a petitioner files for Chapter 13 vs. Chapter 7 is that some or all of the his/her debts cannot be discharged in a Chapter 7 bankruptcy.  

Bankruptcies are considered a public record and remain on your Credit Report for 10 years from the filing date. 

Wait Periods: 

Chapter 7 - begins on the date of discharge. 

Chapter 13 - depending on the program, can begin on the filing or discharge date. 

A Charge-Off occurs when a creditor writes off a debt and is no longer trying to collect.  A 1099 form is typically issued to the borrower for tax purposes. 

The creditor reporting the charge-off will remain on the Credit Report for 7 years from the date of last activity (payment or charge). 

Lenders usually don't require charge-off items to be paid, and because the creditor is no longer trying (or legally able) to collect the debt, no payments are required to be factored into the applicant's debt ratios. 

Collections are past-due accounts (typically by >120 days), for which a creditor or collection agency is still actively pursuing the money owed.  

The creditor reporting the collection will remain on the credit report for 7 years from the date of last activity (payment or charge).

Most loan programs today do not consider 

Medical Collections.  

Non-medical collections are typically allowed to remain open, as long as 5% of the outstanding balance is factored in as a debt and an "estimated payment" is established should the collection ever go to Judgment.   

Foreclosures occur when a borrower fails to repay a mortgage debt and the bank must take back the property and sell it.  

Every state has different foreclosure rules and regulations. The important thing to note is that the date on which the property was transferred from the original borrower to the new buyer is the date that the wait period begins.  It doesn't matter when the current occupant moved out or even gave the keys back (unless it was a Deed in Lieu of Foreclosure).  

The creditor reporting the foreclosure will remain on the credit report for 7 years from the date of last activity (payment or charge). 

The date on the Trustees Deed usually starts the wait period clock. 

Judgments and Liens no longer report to the Credit Bureaus. 

Here's why:

Except for bankruptcies, there was no verification of Social Security Number or identity, and many public records were reporting incorrectly.  

Mortgage companies pull a separate report that shows any public records filed, but those are no longer factored into your credit score. 

Any judgments or liens will also show up on a name search or may be recorded against your properties if filed in the county where the properties are located.  

Federal Tax Liens:  You may still be able to purchase a home with an outstanding federal or state tax lien, as long as you have a payment plan in place and depending on where the lien is recorded vs. where the property is located.  Different loan programs have different guidelines. 

Any property being financed with a lien recorded against it would (a) have to be paid in full; (b) have the lien released; or (c) have the lien subordinated if the lending guidelines allow it. 

A Short Sale occurs when a bank agrees to allow a sale when the bank receives less than the mortgage payoff that is due.  

Credit reports will show "settled for less than full balance" and in most states, the bank will issue a 1099 for any deficiency balances.  For properties that are not owner occupied, there can be deficiency judgments, and banks are less inclined to let investors walk away with paying less than the full amount owed.  

The creditor reporting the short-sale/balance settled for less will remain on the credit report for 7 years from the date of last activity (payment or charge).  

The Short Sale wait period begins with the settlement date on the final closing statement at time of sale. 

Loan applications require that applicants disclose a Short Sale in the past 7 years, along with a Foreclosure, Deed in Lieu of Foreclosure, etc.