Tennessee residents struggling with unmanageable financial situations are sometimes put off seeking debt relief because they are worried about the impact filing for bankruptcy would have on their credit. Bankruptcies appear in the public records section of credit reports, and they can remain there for up to 10 years. However, seeking a fresh start does not always lower credit scores and some people find it easier to borrow after filing Chapter 7 or Chapter 13 personal bankruptcies.
How long do bankruptcies remain on credit reports?
There are two types of personal bankruptcy. Chapter 7 bankruptcies, also known as liquidation bankruptcies, discharge outstanding debts and remain on credit reports for 10 years. Individuals who file Chapter 13 bankruptcies enter a repayment plan that lasts for three or five years. Chapter 13 bankruptcies remain on credit reports for seven years.
Personal Bankruptcies and credit scores
Most people file personal bankruptcies after months or years of financial struggle and many missed or late payments. Their credit scores are usually quite low when submitting their Chapter 7 or Chapter 13 petitions. When their debts are discharged, the amount they owe is reduced and their debt ratios improve. Debt ratio is an important part of the credit score formula, and improving it could offset the impact of a bankruptcy.
A fresh financial start
Personal bankruptcy offers people struggling to cope with overwhelming debt the possibility of a fresh financial start. Bankruptcies remain on credit reports for up to 10 years but do not always make borrowing more difficult. This is because the debts discharged by a bankruptcy are no longer considered when credit reporting agencies calculate an individual’s debt ratio, which is a key component of the credit score formula.