Hands surrounding model home on desk next to bankruptcy form and pen

How Long Does Bankruptcy
Appear on a Credit Report?

Cannon Law Offices, PLLC April 29, 2022

Bankruptcy offers a way out of debt for those who find themselves unable to get out from under it any other way. The financial relief releases a tremendous burden from your shoulders, but it’s not without a few drawbacks.

It is true that Chapter 7 or Chapter 13 bankruptcy shows up on credit reports for a while. Its presence will negatively affect your credit score and everything related to it. Nonetheless, the bankruptcy is not a permanent fixture on your report. A temporary inconvenience may be a small price to pay to find your financial footing again.

At Cannon Law Offices, PLLC, our bankruptcy attorneys know that choosing to file for bankruptcy is never an easy decision. We also know the option is available for some extremely valid reasons. If you live in Greenville or anywhere in eastern North Carolina, including Wilmington, the Outer Banks, or Washington or Hyde counties, we can help you understand how bankruptcy affects your credit report, for how long, and what you can do to begin rebuilding your score right away.

How Long Does Chapter 7
Bankruptcy Remain on My Report?

A Chapter 7 bankruptcy eliminates all dischargeable debt. This includes debt such as credit cards, unsecured personal loans, and medical debt. You may also discharge secured debt such as the mortgage on your home or your auto loan, although you surrender them in the process.

A Chapter 7 bankruptcy appears on your credit report for 10 years from the date you filed. Debt discharged in the bankruptcy filing will be removed from your report earlier, although the bankruptcy itself will remain for the full 10 years in most cases.

How Long Does Chapter 13
Bankruptcy Remain on My Report?

Chapter 13 bankruptcy reorganizes your debt so you can reduce the amount you owe and complete a more manageable repayment plan. Since you continue paying on secured debt, such as your mortgage, you do not need to forfeit your home so long as you adhere to the terms of the three- to five-year repayment plan.

Because you are not discharging all your debt in Chapter 13, it remains on your credit report for less time than Chapter 7, that is, seven years from the filing date rather than 10. Accounts that were delinquent prior to filing may come off your report sooner.

How Much Does a Bankruptcy
Affect My Credit Score?

The bankruptcy will impact your credit score for as long as it appears on your credit report. However, in all likelihood, your credit score was less than stellar prior to filing for bankruptcy. Without filing for bankruptcy, it was probably only to get worse, not better.

Chapter 7 and Chapter 13 bankruptcy offer a fresh start for you and for your credit score. Once you file, you can immediately begin taking steps that will begin moving your credit score upward, despite the bankruptcy on your report. Taking that hit to your score when you file may be the best way to begin moving it in the right direction.

What Can I Do to Help?

There are four major steps you can take to counteract bankruptcy’s impact on your credit score. These should help put your score on an upward trajectory after you file for bankruptcy.

  1. Start rebuilding your credit right away. You may think that’s impossible on the heels of bankruptcy, but it’s not. Keep current on payments on any debt not discharged in a Chapter 7 bankruptcy, on the repayment plan in a Chapter 13 bankruptcy, and on any new debt you may incur. Apply for a secured credit card that prohibits you from overspending and encourages timely repayment. You can also apply for a credit-builder loan with a local credit union.

  2. Check with the three major credit reporting agencies that only the debt included in the bankruptcy was reported. For example, if a credit card balance was discharged, that will be reflected on your report, but if you are continuing to make payments on another debt that wasn’t included in the bankruptcy, your ongoing satisfaction of that debt should be reflected on your report. Never assume that creditors have reported accurately to the reporting agencies.

  3. At the conclusion of a Chapter 13 repayment plan or 10 years after filing for Chapter 7 bankruptcy, check with the major reporting agencies to make sure the bankruptcy has been eliminated from your credit report.

  4. Perhaps the best way to address your credit report and credit score is to avoid getting into debt you cannot afford again once you file for bankruptcy. Making wiser financial decisions going forward will make that notation on your credit report a distant memory down the road.

Legal Guidance You Can Trust

Filing for bankruptcy is a major decision. As bankruptcy attorneys, we help our clients in Greenville and throughout eastern North Carolina explore their options and understand the ramifications. Having that bankruptcy appear on your credit report may be just what you need to right yourself financially.

If you are considering bankruptcy, call Cannon Law Offices, PLLC today to schedule a time to visit with our lawyers. We’re prepared to help, so call now.