“How Long Does Bankruptcy Affect Your Credit Score?”

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How Long Does Bankruptcy Stay on Your Credit Report?

Bankruptcy is a legal process that helps individuals overwhelmed by debt avoid being sued by creditors. It results in the discharge of many types of consumer debt, though not all. When you file for bankruptcy, creditors typically cannot collect the full amount owed, making bankruptcy a significant negative event on your credit report. The impact of bankruptcy on your credit score diminishes over time until it eventually expires.

Chapter 7 Bankruptcy: 10 Years

Chapter 7 bankruptcy, also known as liquidation bankruptcy, involves the forfeiture of property to a court-appointed trustee. The trustee sells the property and distributes the proceeds among creditors. Depending on the value of the assets, creditors may receive only a small portion of what they are owed, or nothing at all if the debtor has no assets. A Chapter 7 bankruptcy remains on your credit report for 10 years from the filing date.

Chapter 13 Bankruptcy: Seven Years

Chapter 13 bankruptcy, sometimes called a “wage-earner’s plan,” allows individuals with sufficient income to keep more of their assets. You make monthly payments to a court trustee for three to five years, who then repays your creditors. If you complete the repayment plan, your remaining eligible debts are discharged. A Chapter 13 bankruptcy stays on your credit report for seven years from the filing date.

Can You Remove Bankruptcy From Your Credit Report?

No, you cannot remove an accurate record of bankruptcy from your credit report. It will appear on your credit report within a month or two of your court filing and will remain there until its expiration date—10 years for Chapter 7 and seven years for Chapter 13. If your credit report inaccurately shows a bankruptcy or if a bankruptcy entry remains past its expiration date, you can dispute the inaccuracy with the credit bureau.

How to Rebuild Your Credit After Bankruptcy

Rebuilding credit after bankruptcy can be challenging, but it is possible. Here are some strategies to help improve your credit score:

• Become an authorized user: Ask a friend or relative with a strong credit history to add you as an authorized user on their credit card. Their payment history will appear on your credit report, benefiting your credit score.
• Get a secured credit card: A secured credit card requires a cash deposit that serves as your borrowing limit. Regular use and timely payments can help establish a positive payment history.
• Open a credit-builder loan: A credit-builder loan helps improve your credit score by issuing a small loan that you repay in installments. The lender places the funds in a special account, and you gain access to the money once the loan is repaid.

The Bottom Line

Bankruptcy can significantly impact your credit, but it is not a permanent condition. A Chapter 13 bankruptcy disappears from your credit report after seven years, and a Chapter 7 bankruptcy after 10 years. The negative effects on your credit score lessen over time, and you can start rebuilding your credit as soon as the bankruptcy process ends. Regularly monitoring your credit score and report can help you track your progress.

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