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- A bankruptcy can stay on your credit report for 7-10 years, depending on what chapter you filed.
- Credit scores usually drop at least 100 points or more after bankruptcy is added to a credit report.
If you're feeling overwhelmed by your debts, bankruptcy is a legal process that can help you find relief. Filing for bankruptcy could stop a foreclosure or car repossession, protect your wages from garnishment, or keep your utilities from being turned off.
But bankruptcy also has its fair share of disadvantages. First, navigating a bankruptcy will typically require the help of an attorney, which can be expensive. Second, your credit score will take a hit after bankruptcy. And damaged credit can make it more difficult to get approved for a line of credit in the future, especially credit with attractive rates and terms.
But the good news is that a bankruptcy won't hurt your credit score forever. Eventually, the bankruptcy will fall off your credit report and will have zero future impact on your score. Here's how long it takes for that to happen.
How long does bankruptcy stay on your credit report?
Bankruptcy typically stays on your credit report for a minimum of seven years and a maximum of 10 years.
While there are many types of bankruptcy, two of the most common types are Chapter 7 and Chapter 13. With Chapter 7 bankruptcy, all eligible debts are discharged immediately. With Chapter 13 bankruptcy, you agree to a three- to five-year repayment plan to partially or fully repay your debts.
- A Chapter 13 bankruptcy can stay on your credit report for up to seven years.
- A Chapter 7 bankruptcy can stay on your credit report for up to 10 years.
It's important to point out that each delinquent account included in the bankruptcy will also remain on your credit report up to seven years. But the seven-year clock for delinquent accounts begins when they were first reported as late, not when you filed for bankruptcy.
So if some of the accounts included in your bankruptcy were already delinquent before you filed, they will fall off your credit report before the bankruptcy does. Any accounts that were current until you filed, however, will be removed from your report at the same time as the bankruptcy.
How does bankruptcy affect your credit score?
Unfortunately, bankruptcy is considered a seriously negative event by scoring models like FICO and VantageScore. As such, if a bankruptcy is added to your credit report, it can have a severe negative impact on your credit score.
According to myFICO, someone with a score in the mid-600s or 700s could expect their score to fall by 100 points or more — even 200+. Also, the more accounts that are included in your bankruptcy, the heavier an impact it's likely to have on your score.
Thankfully, the negative impact of a bankruptcy on your credit report will diminish over time. So even though a bankruptcy will still be on your credit report five years down the road, its impact on your score will be much less than it was in the year that you filed.
Can you remove a bankruptcy from your credit report?
Unfortunately, if a bankruptcy that's appearing on your credit report is legitimate and is being reported accurately, it's highly unlikely that a creditor or credit bureau would agree to remove it.
Credit repair companies don't have any special powers to make this happen either. So don't allow yourself to be scammed into paying an upfront fee to a company that says it can remove legitimate negative items from your reports.
However, you'll want to check your credit report to make sure that the right accounts were reported as being involved in the bankruptcy. You'll also want to make sure that all the accounts that were part of the bankruptcy are showing a balance of zero.
If accounts that weren't part of the bankruptcy are being reported as included, you can dispute the errors to have them removed. Or if included accounts are still showing an outstanding balance, you can dispute this as well.
How can you rebuild your credit after bankruptcy?
While your credit score will take a hit after bankruptcy, there are steps that you can take to begin building a positive credit history again. First, if there are any credit accounts that weren't included in your bankruptcy, make sure that you continue to make on-time payments on them each month.
Second, applying for a secured credit card can be one of your best options for rebuilding your score. Since these cards require a security deposit, which limits the issuer's risk, they're easier to qualify for with poor or damaged credit.
Payment history on secured cards is reported to the credit bureaus just like regular credit cards. So making consistent on-time payments on a secured card can improve your score over time which can open up more credit opportunities for you down the road.
Before you apply for a secured card, check to make sure that it reports cardholder payment activity to all three major credit bureaus. And to see the biggest positive impact on your score, try to keep the credit utilization rate on your secured card below 30%.
Final thoughts
Remember, bankruptcy is just one of various debt relief options. Depending on your situation, you may want to explore other options first, like taking out a debt consolidation loan or trying to work out a repayment plan with your creditor on your own or with the help of a credit counselor.
If you're looking for advice on how best to manage your debts, you may want to consider setting up an appointment with a NFCC-certified credit counselor. In some cases, you may find that a different debt relief strategy would save you money while also having less of a negative impact on your credit score.
But if you do decide to file for bankruptcy (or already have), know that the damage to your credit score will be temporary. Ultimately, the biggest cure to your bankruptcy-related credit score ailments will be time. If you're patient and commit to following good credit habits, your credit score will slowly but surely rise.