Bankruptcy Law

How Long Does Bankruptcy Stay on My Credit Report?

A bankruptcy will leave a grievous strike on your financial record – there’s no avoiding it. Among the most damaging aspects of bankruptcy is the negative impact it has on your credit score and credit report. However, there are methods for fixing your credit, improving your credit score, and setting yourself on a path towards ever-better financial habits. In this article we will answer the following questions:

  • How long will a bankruptcy stay on my credit report?
  • How does bankruptcy affect my credit score?
  • What can I do to repair my credit after bankruptcy?

How long will a bankruptcy stay on my credit report?

  • Up to 10 years for a Chapter 7 bankruptcy and up to 7 years for a Chapter 13 bankruptcy.

The number of years a bankruptcy remains on your credit report depends on the type of bankruptcy. The discharged debts from a bankruptcy typically drop off from your credit report within seven years. Since a Chapter 7 is the fastest form of bankruptcy, debts are usually discharged within six months. Therefore, the delinquent accounts discharged by a Chapter 7 bankruptcy should be removed from your credit report before the bankruptcy itself.

Debts in Chapter 13, meanwhile, will usually remain active until the completion of the three- to five-year repayment plan. As such, the delinquent accounts discharged in a Chapter 13 bankruptcy may remain on your credit report after the bankruptcy itself. Remember that it is also important to carefully review your credit report at least once a year to ensure accurate information is being published.

How does bankruptcy affect my credit score?

  • Your credit score will likely drop significantly: anywhere between 130 to 240 points.

Bankruptcy will affect each person’s credit score differently based on a variety of factors. In any event, you can expect a bankruptcy to leave a serious dent in your credit score. The exact numerical drop will depend on many variables including:

  • your initial credit score prior to declaring bankruptcy,
  • how much debt you had, and
  • how many accounts in collection were discharged.

The higher the debt amount discharged and the more accounts you had in collection, the harder your credit score will take a hit.

It’s also worth noting that the higher (or better) your credit score was before you filed for bankruptcy, the more it will fall. Despite the ominous consequences we’ve just discussed above, there are several actions you can take to build your credit score back up.

What can I do to repair my credit after bankruptcy?

  • Frequently review your credit report for errors, continue generating a credit history, and stick to good financial habits.

Repairing your credit score after bankruptcy takes time and effort. Routinely review your credit report for errors. You are legally entitled to a free copy of your credit report once a year. Approximately 1 in 5 consumers have an error on at least one of their credit reports (there are three nationwide credit reporting companies in the U.S.). Credit reporting agencies are notorious for their inaccuracy. If you spot errors in your credit report, it’s important to dispute it right away. The Federal Trade Commission has steps on their website on how to dispute a credit report. Another option would be to connect with a credit repair agency.

Credit repair agencies are experts at helping consumers dispute inaccurate listings on their credit reports. Just as anyone can take the time and energy to do their own taxes or change the spark plugs in their car, a properly motivated individual can repair their own credit. However, in the same way that many people will turn to accountants to do their taxes, those in need of disputing a credit report will often turn to credit repair agencies for assistance. Usually, a reputable credit repair agency will be able to fix your credit report issues more effectively and efficiently than if you were to do it yourself.

Start re-building your credit as soon as possible after bankruptcy. Don’t leave a hole in your credit history. Don’t wait until after the bankruptcy has been wiped from your credit report to start rebuilding your credit. It will actually be harder to obtain a good loan later on. There are many options for secured credit cards available post-bankruptcy. These types of credit cards require a deposit, but ensure your credit history remains active.

It is crucial after bankruptcy to have a good, strong financial plan going forward. Think of bankruptcy like rehab and force yourself to manage your money carefully. This will help prevent relapse into another bankruptcy. Begin practicing good money habits and force yourself to maintain self-discipline in your finances. Start using your new secure credit card, but make sure to pay off the statements in full rather than just the monthly minimums. By maintaining an active credit history and making sure you pay off what you charge on your card, you should see considerable improvement in your credit score within a few years of bankruptcy.

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