How Long Does a Bankruptcy Stay on Your Credit Report?

Bankruptcy is a process that helps individuals or a business eliminate all (or a portion of) debt. While bankruptcy might give you relief from debt, including credit card debt, you’ll face some pretty severe long-term impacts due to this action.

If you have made the tough decision to file for bankruptcy or are contemplating it as an option, you’ll probably want to know how bankruptcy can impact your credit and how long it will stay on your credit report.

The Different Types of Bankruptcy

There are 6 different types of bankruptcies, but only 2 really matter for most individuals. While each state from Florida to California has a slightly different way of handling bankruptcy, at a high level, this is how they are structured.

Chapter 7

This is the most common type of bankruptcy for both individuals and businesses. Chapter 7 is also referred to as “liquidation” bankruptcy because a trustee oversees the sale of your assets in order to pay off your debts. After everything of value that you own is sold (including real estate, vehicles, and more) and any remaining eligible unsecured debt (such as credit card debt), is wiped away.

You can file for Chapter 7 bankruptcy every 8 years.

Chapter 13

Chapter 13 bankruptcy is the “repayment” bankruptcy. In this type of bankruptcy, the court reorganizes your debt and sets up a monthly repayment process so that you can pay down your debt while keeping your assets. This process takes much longer than Chapter 7 bankruptcy due to the repayment schedule.

Importantly, this type of bankruptcy can stop your home from being foreclosed upon while you are making payments.

You can file for Chapter 13 bankruptcy every 2 years.

The Effects of Filing for Bankruptcy

Filing for personal bankruptcy will have a significant negative effect on your credit, and unfortunately, there’s no way around it. If you had good credit before filing for bankruptcy, your credit score will drop more than someone who had poor credit to start with, but it’s hard to say just how much your credit score will drop.

Having bankruptcy appear on your credit report will make it difficult to get approved for a credit card, mortgage, or personal loan. If you ARE approved, you will likely have higher interest rates and other unfavorable credit terms to contend with.

Even things like trying to rent an apartment, setting up a utility account, or getting the lowest rate on insurance premiums can be impacted by bankruptcy since your credit is often reviewed in these situations. Some jobs may look at your credit if you will be handling money in your role.

If you file for Chapter 7 bankruptcy, you may also lose your assets, such as your house, car, and other valuable possessions.

We have some advice on how to recover your credit after filing for bankruptcy at the bottom of this piece, so be sure to read on.

How a Bankruptcy Affects Your Credit Report

Where a Bankruptcy Appears on Your Credit Report

Credit bureaus regularly receive information from courts on such things as bankruptcy to make sure your credit report has up-to-date information.

A bankruptcy will appear on the “public records” section of your credit report. It may also be referenced in the “account information” section if creditors choose to note that the account is included in your bankruptcy filing.

How Long a Bankruptcy Remains on a Credit Report

How long a bankruptcy appears on your credit report depends on the type of bankruptcy you file:

• Chapter 7 bankruptcy stays on your credit report for 10 years
• Chapter 13 bankruptcy stays on your credit report for 7 years

If you had a debt that was reported as delinquent before you filed for bankruptcy, it will actually fall off your credit report 7 years after it was first reported. If not, it will fall off at the same time your bankruptcy does.

Can You Remove Bankruptcy From Your Credit Report Before 10 Years?

In short, unless there is a mistake on your credit report, bankruptcy cannot be removed from your credit report before 10 years (for Chapter 7) and 7 years (for Chapter 13).

Even after debt from your bankruptcy is discharged (meaning a creditor can no longer try to collect on it), it still won’t be removed from your credit report.

What Happens to Your Credit After a Bankruptcy Is Discharged

You might be wondering if you can create a letter to remove dismissed bankruptcies from your credit report since creditors can no longer collect on this debt.

Unfortunately, having debt discharged doesn’t mean that it will disappear from your credit report. While the status of your debt is changed, it will still remain on your credit report for the stated 7 to 10 years.

Any negative items (such as late payments and bankruptcy) will continue to negatively impact your credit until they are removed or fall off.

What Happens if Bankruptcy Is Still on Your Credit Report After 10 Years

If you still see a bankruptcy on your credit report after 7 years (for Chapter 13) or 10 years (for Chapter 7), this is considered an error as it should automatically fall off after the stated time has passed.

Whenever you see an error on your credit report, you can dispute this error directly with Equifax, Experian, and TransUnion. Legally, the credit reporting bureaus must remove incorrect information from your credit report within 30 days.

How To Rebuild Credit After Bankruptcy

Filing for bankruptcy doesn’t have to mean that you will never qualify for a mortgage or auto loan again. If you take steps to rebuild your credit, it’s possible to recover relatively quickly.

The good news is that the negative impacts of bankruptcy lessen over time, especially if you practice good financial habits after filing for bankruptcy. This includes paying your bills on time and keeping your credit utilization low. Being added as an authorized user on a credit card or getting a secured credit card can also help you rebuild your credit.

Also, be sure to check your credit reports as often as you can. You get multiple free credit reports per year from the credit reporting bureaus, so it’s usually best to space these out so that you can keep a frequent eye on the status of your accounts.

Final Thoughts

Filing for bankruptcy is often a last resort when you find yourself in a tough financial situation. Your credit score will be impacted as long as it remains on your credit report, which can be from 7 to 10 years depending on the type of bankruptcy.

The good news is that the impact on your credit lessens over time, especially if you take steps to make good financial decisions moving forward.