How long does bankruptcy stay on credit report?
Filing for bankruptcy isn’t as big of an issue as it once was but it doesn’t mean one shouldn’t take it seriously because it still can do a lot of damage on your credit report. You may find it hard to get a decent rate for an auto or a home loan, or may not be able to get one at all. Plus, a lot of companies are becoming really strict when it comes to credit checks for their possible employees. According to the Wallet Blog, one in six employers are adding credit score checking as part of their hiring process. This makes it very important for everyone to know “how long does bankruptcy stay on credit report.”
You filed for Bankruptcy, now what?
To know “how long does bankruptcy stay on credit report”, one must first determine what type of bankruptcy it is. The Fair Credit Reporting Act allows it to stay on your report for 7 to 10 years, again, depending on type. It is interesting to note that even if it stays this long, it won’t affect your score the entire 7 to 10 years time and because of this, a lot of people are able to start rebuilding their credit at even a year after the bankruptcy discharge.
Chapter 7 Bankruptcy
Financially speaking, Chapter 7 bankruptcy is the best type for debtors. Only granted to individuals with no assets or virtually any source of financial income, this type of bankruptcy usually results in a full release of all legit debts. This is bad for credit card companies and other lending companies as what they mostly get is a measly sum for their money, if they even manage to acquire anything. However, it’s not as easy to be granted complete Chapter 7 liquidation nowadays as credit reporting agencies have become very strict with bankruptcy filers of Chapter 7, due to the full release on all legit debts and complete liquidation of all assets. So be careful, as Chapter 7 is kept on your credit report for a 10 year period.
Chapter 13 Bankruptcy
Unlike the Chapter 7 bankruptcy wherein all legit debits are cleared, the Chapter 13 bankruptcy works more like a reorganization of your debts. Debtors rarely get out of completely paying their debtors but are usually allowed to enter a court-mandated payment plan instead of having to sell all their assets and liquidate to pay off debtors. As a result of this, creditors are ensured to at least recover a bit of what debtors owe them instead of a measly sum, and it is because of the amenable nature of the chapter 13 bankruptcy that a lot of credit reporting agencies keep this type of bankruptcy on the credit report for just 7 years.
Now that you know the answer to “how long does bankruptcy stay on credit report,” it’s now easier to understand that bankruptcy isn’t the end of your financial world. Although the negative consequences of filing for bankruptcy are highly important for your credit score, it helps to know that it does go away with time. However do not get it confused because if you can you certainly want to make sure to stay on top of your credit at all times instead of having to file for bankruptcy in the future.