How long does bankruptcy stay on your credit reports?

Concerned woman wonders how long bankruptcy will stay on her credit reportImage: Concerned woman wonders how long bankruptcy will stay on her credit report

In a Nutshell

Bankruptcy is a legal process that can help some people reorganize debt. Even though it can be helpful, it’s a serious step that could also negatively affect your credit, appearing on your credit reports and potentially lowering your credit scores. But it shouldn’t hurt your credit forever.
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Bankruptcy is a legal process that can stay on your credit reports for up to 10 years, showing up even after your debts are discharged and the bankruptcy is completed. But exactly how long it will stay on your reports depends in part on the type of bankruptcy you file. Of the various types of bankruptcy, two of the most common are Chapter 7 and Chapter 13.

Type of bankruptcy How long it stays on your credit reports (from date of filing)
Chapter 7 10 years
Chapter 13 7 years

Even though a bankruptcy can stay on your credit reports for up to a decade, its effect on your credit can diminish over time before actually dropping off your reports. And there are things you can do to try to soften the impact.

Here are some things you should know about different types of bankruptcy and how they can affect your credit, plus some tips to help you get through the process.

Two main types of bankruptcy and your credit reports

There are two main types of bankruptcy that individual consumers can file. Here’s what you should know about the impact that each can have on your credit.

Chapter 7 bankruptcy

If you file a Chapter 7 bankruptcy, you’ll probably have to wait the full 10 years for the derogatory mark to drop off your credit reports.

Debts included in your bankruptcy can also negatively impact your credit reports — any discharged debts are likely to be listed as “included in bankruptcy” or “discharged,” with a balance of $0. In a Chapter 7 bankruptcy, these accounts should fall off your reports seven years from the date you filed, unless the accounts were delinquent before the bankruptcy filing date (then they could fall off sooner).

Chapter 13 bankruptcy

A Chapter 13 bankruptcy is a little different. In a Chapter 13 bankruptcy, you agree to a repayment plan that usually takes place over three to five years. Once you’ve completed the repayment plan, the debts included in the plan may be eligible to be discharged.

A completed Chapter 13 bankruptcy and the accounts included in it should disappear from your credit reports seven years from the date you filed. Accounts that were delinquent before the bankruptcy filing may be removed from your reports sooner.

Another thing you should know is that lenders may look at Chapter 13 bankruptcy a little more favorably than Chapter 7, because with Chapter 13 bankruptcy you normally agree to repay at least some of your debt.

How long can bankruptcy affect your credit scores?

Bankruptcy can affect your credit scores for as long as it remains on your credit reports. That’s because your scores are generated based on information that’s found in your reports.

But the impact of bankruptcy on your credit scores can diminish over time. This means your credit scores could begin to recover even while the bankruptcy remains on your credit reports.

After the bankruptcy is removed from your credit reports, you may see your scores begin to improve even more, especially if you pay your bills in full and on time.

Credit tips after bankruptcy

Here are some steps you might want to take to try to keep your bankruptcy from having a worse impact than it could on your credit reports and credit scores.

Make sure the right accounts were reported

After your debts are discharged, review your credit reports to make sure that only the accounts that were part of your bankruptcy are reported by the credit bureaus as “discharged” or “included in bankruptcy” on your reports. If you find mistakes, notify the credit bureaus and dispute the errors on your credit reports (it can take a couple of months for the accounts to be updated).

Work on rebuilding your credit with a secured card

After your bankruptcy, you might want to try to get a secured credit card. Making all of your payments on the secured card in full and on time and keeping your credit card utilization rate low could help you improve your credit over time.

5 of the best credit cards after bankruptcy

Review your reports once the time is up

Once your bankruptcy has been completed and the seven- or 10-year clock has expired, review your reports again to make sure the bankruptcy was removed.

A bankruptcy should fall off your credit reports automatically, but if it doesn’t, notify the credit bureaus and ask to have the bankruptcy removed and your reports updated.

Bottom line: Bankruptcy and credit

Deciding to file for bankruptcy isn’t easy, but it can be the right choice for some people. And while bankruptcy may hurt your credit for a while, you can rebuild your credit over time while you wait for the bankruptcy to fall off your credit reports.

About the author: Marcie Geffner is an award-winning freelance reporter, editor, writer and book critic. Her work has been featured online and in print by the Chicago Sun-Times, Fox Business Network Online, Los Angeles Times, The Washi… Read more.