How long does bankruptcy remain on your credit reports?
Bankruptcy has a negative connotation to most people. Arguably, the biggest benefit is the discharge it offers you from being hounded by your creditors trying to get their money back. The court exempts you from most if not all of the debts you owe. It may represent negative information on your credit and all your other financial details though. Despite all that, it’s not as bad as many people imagine. That doesn’t mean that you should be happy at being declared bankrupt. Why? Your credit will take a major hit upon filing bankruptcy successfully. The higher your credit the more points you lose upon filing for bankruptcy. However, the main interest here is the length of time your credit continues taking a hit once the bankruptcy status is confirmed by the courts.
Bankruptcy offers you a window of opportunity through which you can mend some of the actions that drove you into the financial abyss. It gives you a second chance to deal with your debts better. If used well, bankruptcy can enable you to develop the fiscal discipline you need to thrive and take better care of yourself and all your loved ones. Debts can oppress and turn you into a slave. Bankruptcy offers you a legal way of dealing with them without losing your mind. Bankruptcy is crucial for debt management too. It is integral to the wellbeing of any economic system. It avails you a chance to avoid the severest penalties that were once common for people unable to pay their debts. Your inability to repay debts doesn’t make you a criminal, as it once did.
How does bankruptcy affect your credit?
It takes about 7 and 10 years for your credit to state bankruptcy removed. The difference in years depends on the type of bankruptcy you filed. Here, you have two types, namely chapter 7 and chapter 13. For this reason, you should ask yourself how long does chapter 7 stay on credit report or how long does chapter 13 stay on credit report. Chapter 13 bankruptcy disappears in 7 years from the filing date because you repay some of the debts you owe. Chapter 7 takes longer – 10 years – because you pay none of the debts you owe. Therefore, take this into consideration before filing any of these two types of bankruptcies.
Despite this, many people continue applying or filing for bankruptcy. They proceed with this move oblivious of what the credit score after bankruptcy will be like. Most people who have exhausted every option they can think of, especially where repaying debts is concerned, feel that they have no choice other than to file for bankruptcy. The good news is there is a solution for all this. One, you can consult an attorney or credit counseling agency who operates on a not-for-profit basis to know if bankruptcy is something worth pursuing. The agency or attorney will help you understand how does bankruptcy affect your credit.
Other types of negative information
It’s not enough to focus on the impact of bankruptcy on your credit. You also need to look at the impact of other acts on credit. For example, how long does information on late payments, foreclosures, debt collections and public record remain on the bankruptcy? Late payments last for seven years, which is the same case for foreclosures, debt collections and public record. As you may have noticed here, your credit is a product of the type of negative information linked with your finances. Bankruptcy offers you more protection and exemptions than the other types of negative data regarding your finances. For this reason, it’s easy to understand why some people dash to file for bankruptcy before thinking the whole situation through objectively.
Other types of negative information
Avoid making the wrong assumptions if you would like to know how to remove bankruptcy from credit report. Do not be afraid of contacting credit bureaus to obtain any information that could make you more knowledgeable on this issue. Learn from the information these bureaus share on several bankruptcy- and credit-related issues. For example, the information you get could help you learn how to remove bankruptcy from credit report early. The goal is to build a positive and highly favorable payment history. After all, bankruptcy is a payment-related problem. It often arises from one’s inability to make payments on time.
Deal with the myths
Several bankruptcy myths exist. Unfortunately, they help to create a misunderstanding of what one can or cannot do post-bankruptcy. For example, some people believe they will never be able to apply for a home or car loan successfully after being declared bankrupt. Some believe believe that such a status makes them ineligible for secured credit cards. People declared bankrupt face a lot of stigmatization. For example, there is a myth that they could end up in jail. That possibility exists only for people who build their bankruptcy cases on lies. Bankruptcy offers an opportunity for rebuilding your credit; and that’s not a myth!
As earlier stated, bankruptcy plays a critical role in one’s life. It offers you the chance to reorganize and eliminate the debts that threaten to choke you to financial death. That said, it has a negative impact on your credit. It has an Armageddon-like effect on your credit. However, that negative effect can start clearing up sooner than you think. Yes, it’s true that it worsens bad credit, but only for some time. We already read that it can remain on your credit for 10 years. It remains reported for 10 years on all credit reports you will be receiving into the foreseeable future. The main point to pick from all these is you are not helpless.
How to improve credit score after bankruptcy
Bankruptcy reduces a credit score of 780 by roughly 240 points. It reduces a credit score of 680 by around 150 points. As earlier stated, the higher your credit scores the more points you are likely to lose after filing for bankruptcy. That is the clearest answer to the how does bankruptcy affect your credit question. People with a credit score hovering in the 500-range have more to worry about by filing for bankruptcy. That is because they don’t have much credit reputation to protect. If this already makes you worried about bankruptcy, then you should be cautious before filing. Instead, consider a few other better options. Debt relief and repayment are two options worth looking into. You would be better off doing the following too:
- a) paying the debts yourself
- b) working with credit counseling agency on debt management
- c) consolidating all your debts
- d) settling debts
Bankruptcy should always be your last option if the rest fail. Nevertheless, get it if nothing else would work for you. Be ready to wait for up to 10 years before the mark that shows you are bankrupt disappears from the credit report. The disappearance should be automatic after the end of the 7 or 10 years. All accounts that appeared in your bankruptcy may disappear before your status changes though. Your credit status could begin changing within months of filing for bankruptcy though. For this to happen, you will need to be more proactive with your finances and payments. Take more interest in your credit reports with all the major credit bureaus. Apply for secured credit cards too. Secured personal loans could also help you massively in this regard.
Develop good habits where your personal finance is concerned. Do whatever it takes to keep future financial hardships as far away from your life as possible. This could include evaluating your income afresh. Take more interest in your expenses too. Don’t forget to increase your emergency fund which could always come in handy when you have to contend with financial unknowns that arise at the worst possible moments. Determine that you will avoid debts at all costs too. Bankruptcy offers you a chance to start on a fresh clean slate. Keep it that way. It gives you a second chance at walking in the straight and narrow path financially.
Lastly, it’s important to remember that your life doesn’t end with bankruptcy. You still have decisions to make. You still have to learn how to make the right choices. It takes you about 3-4 months to finish the process of filing for bankruptcy. The time the entire process takes depends on the complexity or simplicity of your case. Some creditors may also cause the process to take longer depending on the objections they have regarding your application for discharge from some of your responsibilities. The sooner you conclude the case, the earlier you can start working on rebuilding your credit. As previously stated, do not approach the post-bankruptcy period alone. Work closely with attorneys and agencies that can help you manage your finances, especially the debts, better.