Many people feel anxious about the prospect of filing for personal bankruptcy. They don’t want to lose their revolving lines of credit or suffer the consequences of their credit score dropping significantly. However, the credit consequences of bankruptcy are temporary, while the discharge that the filer receives can offer permanent relief from certain financial obligations.
When people understand what truly happens during and after bankruptcy, they may feel less frightened about seeking relief from their financial obligations. Bankruptcy does bring down a credit score by 200 points or even more and serves as a lasting blemish on an individual’s credit report.
How long does the record of a personal bankruptcy show up on an individual’s credit report?
Credit reporting is a temporary issue
Federal statutes limit how long the credit bureaus can report on different issues. Typically, late payments and other minor credit issues remain on a filer’s record for seven years. However, there are special rules that apply during personal bankruptcy.
Specifically, bankruptcy may show up for longer than basic debts. The type of bankruptcy that the person files determines how long the credit bureaus report the record of their discharge. If the filer completes a Chapter 7 bankruptcy, then the record of the bankruptcy is visible for 10 years after their discharge.
If the filer completes a Chapter 13 bankruptcy, the reporting window is shorter. The law takes the multi-year repayment plan into consideration. A Chapter 13 discharge only shows up on a credit report for seven years. It is the date of the discharge, not the date of the initial document filing, that determines when the record of the bankruptcy finally disappears.
People can rebuild their credit scores within that time and may find themselves eligible for many different types of credit when the record of their discharge finally comes off of their credit report. Most people become eligible for new lines of credit within a few months of completing the bankruptcy process. The quality of the offers they receive may improve as more time passes.
People struggling with high levels of debt may want to learn more about what bankruptcy can do for them to see if it is a reasonable option. For many people, discharging debts is a better solution than continually struggling to make minimum payments every month. While there may be temporary credit limitations, most filers can secure new lines of credit within months of completing the process.