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How long will a bankruptcy discharge be on your credit report?

On Behalf of | Jan 13, 2022 | Bankruptcy

When you can no longer pay all of your bills every month, your credit report will show those struggles. Your score will start to drop, and any credit offers you receive will likely contain less favorable terms. Late payments, credit cards with balances over the limit and using a high percentage of your available credit can all help drag down your credit score.

Eventually, if you file for bankruptcy, those numerous will all disappear, only for a bankruptcy discharge to replace them. Bankruptcy will drag down your credit score by dozens of points and will limit your credit opportunities for some time.

How long will the discharge from your bankruptcy stay on your credit report?

The length of reporting depends on the kind of bankruptcy

There are different rules for the various kinds of personal bankruptcy. When it comes to how long your discharge stays on your credit report, there can be a significant difference.

A Chapter 7 bankruptcy, also called liquidation bankruptcy, is a pretty quick process. The person filing may have to sell off some assets, but the entire process will only take a few months. After the discharge, the record of the bankruptcy will stay on their credit report for 10 years.

Chapter 13 bankruptcy, on the other hand, takes several years to complete. The person filing usually needs to send payments to the bankruptcy trustee for at least three years before the courts will discharge the remaining balances on their unsecured debt. After that discharge, the bankruptcy will show up on their credit report for another seven years.

The impact of bankruptcy diminishes over time

In the first year or two after you file, you will find that a record of personal bankruptcy makes it harder for you to get credit. However, as time passes, the overall impact of the bankruptcy on your credit report will go down.

Many people qualify for decent financing terms and even large loans like mortgages within several years of their discharge. Of course, you will qualify for better financing terms if you can wait until after the discharge comes off of your credit report. Learning about the basics of bankruptcy can help you regain control over your debt and your budget.

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The Law Office of Kim Covington is a debt relief agency, and I have helped families, individuals and small businesses, file for bankruptcy relief under the U.S. Bankruptcy Code, for over 23 years.