Most consumers who pursue bankruptcy aim to achieve a fresh financial start but are unaware of what happens to their credit score after bankruptcy. It may be surprising to some that after bankruptcy has been completed, all evidence of your financial rebuild may be deleted from your credit report, allowing you to get back on your feet. While this process takes time, it is important to know before you file how bankruptcy affects your credit worthiness. Here’s more about what happens to your credit when bankruptcy comes into the picture.

Chapter 7 Bankruptcy & Credit Score

By far the most common form of consumer bankruptcy, Chapter 7 allows for a discharge of many types of unsecured debts. Unfortunately, Chapter 7 can have a devastating impact on your credit score as it signals to a lender that you are unable to pay your debt and that you have sought to have that debt erased completely. Additionally, even though the debt may be discharged years sooner, Chapter 7 stays on your credit report for ten years. The good news is that the hit to your credit report decreases as you begin the path towards financial recovery.

Chapter 13 Bankruptcy & Credit Score

Less common than Chapter 7, Chapter 13 bankruptcy is popular amongst consumers who still have income to make payments on their debts. This form of bankruptcy allows a debtor to enter into a repayment plan for eligible debt. Payments are made over a span of three-to-five years. Chapter 13 signals to creditors that while you have hit a rough patch financially, you are attempting to pay back some of your debt. For this reason, Chapter 13 will negatively impact your credit score but will not be as severe as Chapter 7. Specifically, Chapter 13 is erased from your credit report after only 7 years. That’s much shorter than Chapter 7. As with Chapter 7, as time goes on, the impact to your credit begins to diminish.

Rebuilding Your Credit

A little-known fact is that you do not need to wait seven-to-ten years to start rebuilding your credit. Even if your bankruptcy case has not concluded, there are steps you can take to start repairing the negative impact that bankruptcy has on your credit score. Some lenders offer secured credit cards, which if used responsibly can have the effect of raising your credit score. These cards require a collateral deposit and are treated as secured debt. As stated earlier, as time elapses and you continue to meet your financial obligations, your credit score will improve.

Additional Considerations

Deciding to file for bankruptcy is a big deal. This is not something that you should enter into lightly. An experienced bankruptcy attorney can help ensure that you know your options. They can help you pursue the best financial path towards getting out of your financial jam. Whether you are considering filing for bankruptcy, modifying your mortgage, or are just suffering from unmanageable credit card or student loan debt, The Bankruptcy Team, PLLC is here for you. The Bankruptcy Team, PLLC is devoted to assisting clients resolve their financial problems through bankruptcy, foreclosure or other legal avenues so that they can get the fresh start that they are entitled to. We also aim to protect those who have been exposed to unfair debt collection practices such as repeated phone calls, abusive and threatening language, and the use of deceptive methods. Our experienced attorneys will thoroughly review your situation and advise you about available options that closely fit your needs and which protect you from bad debt collectors. To consult with The Bankruptcy Team, PLLC, call or contact us today.