Individuals who file for bankruptcy often wonder how long it will impact their credit. The good news is that bankruptcy doesn’t destroy your credit forever. It won’t leave a permanent black mark on your finances.
At JPP Law, we know all too well that bankruptcy can impact a person’s credit for up to ten years. The exact duration depends on what your financial situation is and what kind of bankruptcy you file for.
Here’s a quick overview of what you need to know.
Chapter 7 Bankruptcy
A Chapter 7 bankruptcy stays on your credit reports for about ten years from the time of filing. After this period, the debt is discharged, and you won’t be responsible for paying it.
Although bankruptcy stays on your reports for ten years, its effect on your credit scores will diminish before this period. That means you can start improving your credit score even before bankruptcy is removed from your reports.
Chapter 13 Bankruptcy
A Chapter 13 bankruptcy remains in your credit reports for seven years after you file for bankruptcy. Any delinquent account you had may fall off your report before the seven years is over.
This type of bankruptcy involves paying back a portion or all of your debts over a three-to-five-year period. Debts are usually discharged after successful repayment.
Does a Bankruptcy Discharge All Debts?
Filing for bankruptcy can help wipe out nonpriority unsecured debts. Some of these debts include:
- Unsecured credit card debts
- Personal loans
- Overdue utility payments
- Medical bills
That said, a bankruptcy won’t save you from unforgivable debts like:
- Student loans
- Alimony and child support
- Tax debts
- Non-dischargeable debts
- Fraud-related debts – when the creditor files an adversary proceeding
How Does Bankruptcy Affect Your Credit Score?
Your credit score depends on the status of your credit reports. As long as the bankruptcy is on your credit reports, your credit scores will take a hit. The impact tends to be significant in the first months but will lessen with time.
Your scores will improve if you begin managing your credit positively.
Bankruptcy can cause your credit score to dwindle by 130 to 240 points. According to FICO scores, the lower your credit score, the lesser the impact. So, if you had an excellent credit score before filing for bankruptcy, it will drop by more points than a bad score.
How To Rebuild Your Credit After Bankruptcy
You can rebuild your credit after a bankruptcy falls off. Below are some tips to help rebuild your creditworthiness.
Monitor Your Credit Reports
A vital step in repairing your credit involves reviewing your credit reports. It’s advisable to review reports from Transunion, Experian, and Equifax. Check whether the reports have zero balances or any visible errors. File a dispute if you find any errors.
Keep Up Payments
Bankruptcy does not affect all accounts. You’ll still have unforgivable debts to settle. Ensure that you repay such debts because late payments could further worsen your credit score.
Apply for New Credit
It’s wise to get new credit after your bankruptcy is deleted. Positive use of new credit can help offset the adverse effects of bankruptcy.
The best way to get new credit is to apply for a secured credit card. You only need a cash security deposit to get this credit. Another alternative is to get a credit builder loan.
Get the Help You Need from JPP Law
Bankruptcy can affect your credit reports for up to ten years. That’s why it’s important to find a knowledgeable bankruptcy attorney in Scranton, PA to help you weigh your options, navigate the bankruptcy process, and finally take control of your financial situation.
No one understands the ins and outs of bankruptcy better than the expert legal staff at JPP Law. Contact us today to schedule an appointment.