Bankruptcy and Your Credit Report: How Long Will It Stay There?

 Posted on November 03, 2021 in Uncategorized

When you file for bankruptcy under Chapter 7 or Chapter 13 it can stay on your credit report for up to 10 years. Luckily for most of our clients, the bankruptcy being reported on their credit report isn’t too damaging. Most of our clients actually see their score improve, because their debt-to-income ratio instantly improves, and because creditors are required to remove any negative reporting from the credit report. As a result, getting a car, loan, or credit card is typically not difficult.

Additionally, there are actions you can take on top of filing bankruptcy in order to hasten the process of improving your credit score. This post details some strategies to achieve that goal.

Chapter 7

You can discharge most, if not all, of your debts after filing for Chapter 7 bankruptcy. This means that a lender cannot collect a discharged debt, and you’re no longer responsible for repaying it.

While the bankruptcy will be reported on your credit report for 10 years after the filing date, bankruptcy will automatically remove a debt on your credit report, which can help raise your credit score.

Chapter 13

Chapter 13 bankruptcy requires you to create a 3 to a 5-year repayment plan for part or all of your debts. Your unsecured debts are discharged after you finish the plan, whether or not they were paid in full.

A Chapter 13 bankruptcy can last up to seven years on your credit report, but all discharged debt will be removed from your credit report after your Chapter 13 bankruptcy is completed, which can help boost your credit score.

Improve Your Credit Score With These Tips

1-Familiarize yourself with your credit report: Everyone can access a copy of their credit report for free here. Usually, it is only provided once a year—however, in the aftermath of the Covid-19 pandemic, users can get free weekly reports until April 20, 2022.
Understanding your credit score’s components will help you make focused changes and understand why your score is growing or decreasing. You’ll be able to detect any mistakes that lower your score, such as erroneous account information or public records.

Our clients report that bankruptcy generally results in a small increase in credit score once the negative creditor reporting is removed, but it fluctuates and improves with time. Checking your credit score every month is an integral part of rebuilding your credit after bankruptcy. Once your bankruptcy debts have been discharged, re-evaluate your credit score to ensure it has been updated.

2-Healthy financial habits aren’t optional: To keep your credit score from plummeting, take steps like cutting back on your usage of credit cards, making your payments on time, and setting aside money for emergencies. The time it takes to repair your credit after bankruptcy varies from borrower to borrower, but it may take from two months to two years. As a result, it’s critical to develop and maintain appropriate credit practices, even after your score has improved.

3-Get a credit card: Reducing your reliance on credit cards might help you repair your credit after you’ve filed for bankruptcy. You can start rebuilding your reputation with lenders by strategically using credit cards.
Many credit card companies will offer you a credit card after discharge. It is not a bad idea to get a credit card and use it for just gas, or just groceries. Make sure to pay off the card before the balance is due. Capital One typically will offer you a card post-discharge, so start there.

You can also get a secured credit card. While the interest rates on these cards tend to be high, if they report to all three credit agencies, they’re a fantastic way to demonstrate responsible credit behavior until you’re better eligible for a regular card with better conditions.

If you don’t want a secured credit card, you can also ask a family member or friend with solid credit to enroll you as an authorized user. Your credit score may improve if the issuer submits the card’s good payment history to the three major credit agencies. However, your credit score may suffer if the principal cardholder misses a payment or exceeds their credit limit.