Chapter 7 and 13
Under a Chapter 7 filing your credit report will show the bankruptcy you filed for up to 10 years. Under a Chapter 13 your credit report will show the bankruptcy for up to 7 years. The limits listed above are the maximum amount of years allowed for a bankruptcy to show up on the debtor’s report history, it does not mean the bankruptcy could be removed earlier. The Fair Credit Reporting Act (FCRA) sets these parameters and help ensure that credit histories are both protected and accurate.
What does this mean? Well, generally, it does NOT mean you can’t do anything with your credit, i.e. improve it. While it’s true that filing for bankruptcy will impact your credit negatively, at least initially from 130-240 points, this is not the endgame. Long-term, or even over the course of a year, people who file for bankruptcy can increase their scores substantially, and in some cases get them higher than where they were before just after 12 months!
In fact, our law firm has had many cases where a client who filed bankruptcy under Chapter 7 or 13 had their credit score in the high 600s after one year, and well over 700 the following year; what’s more, we’ve had clients apply and get home loan mortgages after two years from filing for bankruptcy!
So, while your credit report may reflect the bankruptcy case for 7 to 10 years, this does not mean your credit is kaput. Quite the opposite. The whole purpose of the bankruptcy institution is to provide you, the debtor, with a fresh, financial start. It would make no sense if bankruptcy impacted your credit score negatively and forever. Most people who file for bankruptcy do not have a good credit score to begin with, but often they also assume that filing will only hurt their credit. This is not true in the long run! The reverse is what happens. No matter your current score, after filing for bankruptcy your score will improve after a year, assuming you take ahold of your finances with the fresh start and should be well over 700 after two years.
If you’re worried about your credit history know that the bankruptcy you have filed or plan on filing will be removed, at a maximum, 10 years from filing on a Chapter 7 and 7 years from filing a Chapter 13. What’s more, it’s possible to remove it earlier but in the interim the more important things to lookout for are: (1) ensure that debts which were discharged are removed from your credit report; (2) individual accounts that may have been delinquent should be removed after seven years. The timing here, for the independent accounts starts at the delinquency and NOT the time of filing which means they can be removed earlier; (3) if you filed over 10 years ago then the bankruptcy must be removed from your credit history.