When you find yourself in overwhelming financial debt, bankruptcy may become the best option. For many, it’s a lifeline that can save your home from foreclosure and end creditor harassment. Still, before making that choice to pursue bankruptcy, you need to consider both the short- and long-term consequences. How long does bankruptcy stay on your credit report? What can you do to lessen its impact?
At Integrity Law Group, our bankruptcy lawyers can help you navigate this complicated, stressful situation for the most successful outcome. We believe in a holistic, comprehensive approach to helping you achieve greater financial security, which is why our guidance and support don’t end after your bankruptcy case is closed. In this blog post, we’ll explore the aftermath of bankruptcy and how it affects your credit.
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Overview of Chapter 7 and Chapter 13 Bankruptcy
What happens after bankruptcy and how it affects you will depend on which type of bankruptcy you file. The most common types are Chapter 7 and Chapter 13 bankruptcy. In Chapter 7, any non-exempt assets (like extra property or valuable, non-essential belongings) will be liquidated to pay off as much of your debt as possible. Then, most of your remaining unsecured debts will be discharged, giving you a clean slate.
In Chapter 13 bankruptcy, no assets are liquidated. Instead, you’ll work with your attorney to create a repayment plan. This plan gives you more time and flexibility to repay your debts. Once you’ve completed the repayment plan and paid off an agreed-upon amount of your debt, the rest—with some exceptions—will be discharged.
Which is Best for You?
Most people file for Chapter 7 bankruptcy. If you have limited income, wealth, or assets, this is probably the best option for you. You will most likely lose few, if any, of your belongings to liquidation, especially with a lawyer’s help. And after Chapter 7 bankruptcy, you get a fresh start.
However, Chapter 13 is often the better choice for those who want to protect property and assets from liquidation. If you have high enough income or accumulated wealth, you may not qualify for Chapter 7 anyway. Integrity Law Group can help you determine which of these options is better for your unique situation, considering your finances, income, and assets. Whichever you pursue, we can guide you through every step and help you reach the best conclusion.
The other consideration when choosing between these bankruptcy options is the long-term effects: Chapter 7 stays on your credit report longer than Chapter 13.
How Long Does Bankruptcy Stay on Your Credit Report?
The primary downside of filing for bankruptcy, even if you don’t lose any assets in the process, is its effect on your credit score. A low credit score makes it difficult, sometimes nearly impossible, to get credit cards, loans, and even rental housing, sometimes. It can leave you floundering when you’re already financially struggling.
So, how long does bankruptcy stay on your credit report? Chapter 7 bankruptcy stays on your credit report for up to 10 years, while Chapter 13 stays for up to seven years. At Integrity Law Group, we understand the impact this has on individuals and families trying to get a fresh start, which is why our support and guidance continue even after your bankruptcy case is closed.
Tips for Rebuilding Your Credit After Bankruptcy
While you can’t change how long a bankruptcy will be included on your credit report, you can reduce its damage. Many people see their credit scores improve within a couple of years. Rebuilding your credit is essential to regaining financial security following bankruptcy. A healthy credit score will help immensely, even if there is still a bankruptcy on your report.
To rebuild credit, you need to do the same thing you would normally do to improve your score: prove that you pay your debts regularly and on time. But the difficulty is that it’s hard to get credit cards or loans that give you that opportunity after bankruptcy. Here are some tips for rebuilding your credit.
How to Get a Credit Card After Bankruptcy
While you may not be able to get a regular credit card soon after bankruptcy, a secured credit card is specifically meant for those with low credit scores and is much easier to get. It’s secured because you’ll need to make a deposit upfront. This secured credit card is a great way to start rebuilding credit.
You can also try getting credit cards through gas stations or retail stores. These often have easier approval criteria and still offer opportunities to boost your score.
Become an Authorized User
A willing friend or a family member with a strong credit score can be a great help. If they make you an authorized user on one of their credit cards, you’ll get a helpful hand-up to boost your score.
Similarly, consider asking someone to be a cosigner so that you can get a loan. While you shouldn’t necessarily take out loans you don’t need while recovering from bankruptcy, sometimes it’s unavoidable, and a loan is another opportunity to build credit with timely payments.
Healthy Credit Habits
Getting new credit cards only helps your credit score if you use them correctly. After bankruptcy, it’s more important than ever to practice healthy credit habits.
- Monitor your score and reports, keeping an eye out for potential areas to improve.
- Watch out for inaccuracies or outdated info on your report that might be unfairly harming your score.
- Keep a low balance on credit cards. How much of your available credit you use each month, known as your credit utilization rate, impacts your score. Try to use less than 30% each month.
- Pay on time and in full. Don’t get a new credit card unless you can pay it off completely every month.
Learn More About Bankruptcy and Financial Security at Integrity Law Group
You can’t remove bankruptcy from your credit report, but you can take steps to minimize its impact and improve your financial security. At Integrity Law Group, we’re here to help make the bankruptcy process as painless and successful as possible. We can help you through bankruptcy itself and offer experienced advice on avoiding debt and rebuilding credit.
Our commitment isn’t just to help you complete your bankruptcy case—it’s to help you achieve and keep financial stability. We encourage you to reach out for a consultation so we can discuss your situation and the best path forward.