How Long Will Bankruptcy Remain On My Credit?
One concern that a lot of people have when they file for bankruptcy is how long their bankruptcy will show up on their credit report. Although the answer to that question may not be what you may have wanted to hear, there is some good news that goes beyond the number.
How Do Credit Reports Work?
First it is important to understand how credit reports work. There are three major credit reporting agencies (CRAs) in the United States: Experian, Equifax and Transunion.
The CRAs are really services. Creditors will report things that you do with your finances to the CRAs, whether it be a made payment, a late payment, a missed payment, a judgment against you, or a bankruptcy along with loads of other things.
When you apply for a loan, a job, to rent an apartment, or anything else that requires a credit check, the potential creditor checks the credit reports that are maintained by the CRAs. They can then see all the financial information in your past. They will determine whether to give you loans, and at what interest rate, based on what is on your credit reports.
How Long Will Bankruptcies Stay on Your Credit?
The law says that negative things on your credit report—including a bankruptcy—can’t stay on your credit report forever.
As a general rule, a Chapter 7 bankruptcy shows on your account for 10 years after you file. The individual accounts on your credit reports, which are discharged in your bankruptcy, will reflect that they were “included in bankruptcy.” Those individual accounts must come off seven years after you file for bankruptcy, but could come off your credit report sooner, if you incurred the debt before the bankruptcy.
Chapter 13 is a little different. A Chapter 13 bankruptcy will come off of your credit seven years after you file for bankruptcy.
The Good News
These time frames may seem long, but there is some good news. The first good news is that shortly after your bankruptcy, your credit may actually be better than it was before the bankruptcy. Why? Because before the bankruptcy you may have owed, for example, $50,000 to 10 different creditors and you were delinquent or in default on 6 of them.
The net effect on your credit in that situation may actually be worse than having all of your debts discharged, but having it notated on your credit report that you had a Chapter 7 bankruptcy.
Additionally, as time goes on, the effect on your credit will lessen—that’s true of all credit makings. Older things are weighted less. So, even though the bankruptcy will remain on your credit for 7-10 years, the negative effects can be mitigated as time goes on—especially if you start doing things to build your credit when your bankruptcy is over.