Bankruptcy and Your Credit Score

Many prospective clients are curious as to how a bankruptcy will impact their credit. Many are worried that they will never be able to get credit again, and therefore never be able to buy a car or a home after filing bankruptcy. This just isn't the case.

1. How long does a bankruptcy stay on my credit report?

   Generally, a chapter 13 bankruptcy will stay on your credit report for 7 years. Chapter 7 tends to stay on for 10 years. That time is measured from the date of filing. It generally takes 4-6 months to get a discharge in a chapter 7 case. So, if you file a chapter 7, you can expect the bankruptcy to appear on your credit report for around 9.5 years after your discharge. A chapter 13 case takes anywhere from 3 to 5 years to complete, depending on your income level. So a chapter 13 bankruptcy will appear on your credit report for 2-4 years after you receive a discharge.

2. How long do delinquent accounts stay on my credit report?

   Individual delinquent accounts may disappear from your credit report sooner than your bankruptcy does. This is because each individual delinquent account will remain on your report for a total of 7 years from the date that it first became delinquent. So if you have accounts that are delinquent before the bankruptcy, they could fall off of your report before the record of the bankruptcy is removed.

3. How will a bankruptcy affect my credit score?

   Any bankruptcy will have a negative effect on your score. However, the extent of the effect will depend on what your score is before the bankruptcy. If you have a high score going in, bankruptcy will have a much larger effect on the score. If you have a lower score going into the bankruptcy, then filing is not likely to have a drastic effect on your score.

4. Can I rebuild my credit after filing bankruptcy?

   It is certainly possible to rebuild your credit after a bankruptcy, and there are companies that will work with you to re-establish your credit after you file. How fast you rebuild your credit generally depends on how fast you can establish a positive payment history for accounts that appear on your credit report. This can be more difficult to do in a chapter 7 because, while there are companies that will work with you, it may be difficult to get multiple accounts opened after a chapter 7.
   
   Rebuilding credit is easier in a chapter 13 bankruptcy because chapter 13 involves a payment plan in which your existing creditors continue to get at least partial recurring payments. This helps to re-establish a positive payment history on more accounts that appear on your credit report, thereby improving your score more quickly.