Chapter 7 stays on your credit report up to 10 years. Chapter 13 stays on your report up to 7 years.
One argument against filing bankruptcy is that it “ruins your credit”. More often than not when one is considering bankruptcy, their score is already in bad shape.
When I run a credit report for my clients – to make sure I have all debts and obligations accounted for -my service calculates a pre-filing score and 12 month post-filing score. It is not unusual to see an increased score of 100 to 150 points or more in just 12 months!
So while a Chapter 7 bankruptcy remains on your credit report for up to 10 years, and a Chapter 13 stays on your report up to 7 years, your score begins improving right away and continues to improve from the date of filing going forward.
Continuing payments on home mortgage or a car payment after filing bankruptcy will help improve your score. Some people get a secured credit card from their bank or credit union. Put $200 or $300 in an account that secures a card and after several months of use and payments it becomes a regular account. Members of credit-union with existing loans and even small unsecured loans can keep their accounts and reaffirm the obligations to help improve their score and keep a good relationship with their credit union.
Things to consider when deciding whether to file bankruptcy should include the amount of debt you have to eliminate and your ability to pay it back if you don’t file bankruptcy. Options include budgeting and work out options with creditors and/or looking into some type of consolidation loan.
Worrying about your credit score if you are hopelessly behind on your bills and unable to find a way to pay them back without bankruptcy protection should not be a consideration.
If you want check your current status, anyone can order a free report from each of the three agencies once per year. You can also request a free report from Experian anytime.