Bankruptcy and Credit

Your credit report will reflect your bankruptcy filing for up to 10 years, but many credit reporting agencies will remove it after 7 years. But, for many consumers, a 90-day late payment and a bankruptcy have approximately the same effect on their credit score. The bankruptcy stays on your credit report for up to 10 years, but its negative effect on the credit score starts to decrease around year 2.

If your credit was in bad shape prior to filing for bankruptcy (which is the case for most everyone considering bankruptcy), your credit score can actually improve after a bankruptcy. This is because the credit reporting agencies reclassify you with other people who have filed bankruptcy, and also because many lenders will you as less of a risk because you have improved your financial situation by wiping out debt through bankruptcy and you are unable to wipe out future debt in another bankruptcy anytime soon.

Chapter 13 is usually viewed less harshly by future creditors than Chapter 7.  Your Chapter 13 bankruptcy will show up in the public records portion of  your credit report, remain on your report during the payoff period and stay on your report for an additional 7 years.  However, the effects will be minimized as time moves on and as your old accounts begin to be removed from your report. As you make your payments consistently in your Chapter 13, you establish a positive pattern that will improve your credit standing.