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How does bankruptcy affect my credit report?
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How does bankruptcy affect my credit report?

On Behalf of | Jul 28, 2021 | Bankruptcy & Asset Protection

When one is thinking about Chapter 7 or Chapter 13 bankruptcy, one of the most common questions is, how does it affect one’s credit report. After all, these two forms of bankruptcy are the most common forms of bankruptcies for individuals.

It does affect one’s credit

Of course, filing for a Chapter 7 or Chapter 13 bankruptcy will damage one’s personal credit score until it is removed. This may affect one’s ability to get a loan for a new home, car or even a personal loan. Though, the effect of a Chapter 7 or Chapter 13 bankruptcy lessens over time, and if one practices good credit habits, one’s score will also increase. This includes paying bills on time, maintaining a low credit utilization rate, etc. So, the actual effect on one’s credit will change as one maintains these habits and over time.

Chapter 7 bankruptcy

A Chapter 7 bankruptcy, once filed, remains on one’s credit for up to 10 years after that filing. Though, one is allowed to discharge some or all of one’s debts, which means that those debts are no longer owed. This is why it lasts so long on one’s credit report, but a fresh financial start can be a great trade-off for a hit to one’s credit.

Chapter 13 bankruptcy

Like a Chapter 7 bankruptcy, a Chapter 13 bankruptcy stays on one’s credit report for seven years. This reduced amount of time on one’s credit is because it is not a total discharge of one’s debts. Instead, in a Chapter 13 bankruptcy, a three- to five-year repayment plan is crafted by the court, attorneys and creditors. After that repayment plan is completed, those debts still remaining in the plan will be discharged.

Reported delinquencies

If a debt was reported as delinquent prior to the bankruptcy though, that debt will fall off one’s credit report in seven years. For both a Chapter 7 and Chapter 13 bankruptcy if it was not reported, it will also be removed seven years after the bankruptcy is filed. Though, for a Chapter 13 bankruptcy, those debts are removed when the bankruptcy filing is removed. As one can see, this can get a bit complicated, which is why we recommend those interested in bankruptcy call a St. Petersburg, Florida, bankruptcy attorney.