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Individuals and businesses often file for bankruptcy when they cannot afford to repay their debts. This leads to several important questions, including “how long does bankruptcy stay on your credit report?”
As you can probably guess, filing for bankruptcy does serious harm to your credit score and history. Credit scores vary depending on which companies calculate them. Overall, though, you can expect a good credit score over 700 to fall by about 200 points. A score below 680 will likely fall by about 150 points.
Given the devastation that filing for bankruptcy does to your record, you need to know how long the effects will last and whether you can do anything to make the process move faster.
Most people and businesses can expect Chapter 7 bankruptcies to stay on their credit reports for 10 years.
When you file for Chapter 7 bankruptcy, a bankruptcy trustee gives appointed to oversee the process. The process involves liquidating many of your assets to repay creditors. Luckily, the court will not liquidate your day-to-day property, such as your primary home or vehicle. If you have additional properties, such as vacation homes, boats, unused land, and extra vehicles, the trustee may liquidate them through an auction.
Unsecured debts always get paid first during Chapter 7 Bankruptcy. Unsecured debts include:
Secured debts do not get prioritized because they still exist even when you cannot repay your debt. A primary residence, for instance, will usually retain its value. Letting people live in the home gives them a chance to build their credit and recover from their poor financial situation. Homelessness would only make the situation more difficult for the lender and the creditor.
How long does bankruptcy stay on your credit report when you file Chapter 13. With Chapter 13 bankruptcy, you actually knock quite a bit of time off of the schedule. Many people find that they can remove the bankruptcy within seven years.
When possible, individuals and families choose Chapter 13 bankruptcy because it:
With Chapter 13 bankruptcy, people earning regular wages can set up payment plans with their creditors. The court will still want a complete list of the person’s assets, but it rarely uses these assets unless the debtor fails to follow their payment plan.
During Chapter 13 bankruptcy, creditors cannot hassle debtors about the money they owe. For the process to work as intended, everyone involved must follow the repayment agreement, which includes leaving the debtor alone while they repay their debt.
Ideally, your bankruptcy will disappear from your credit report at the correct time. Unfortunately, credit bureaus make frequent mistakes. You cannot assume that credit bureaus will remove the information on time.
Take advantage of your free annual credit report to make sure the bureaus have followed through. If you see your Chapter 9 bankruptcy listed after 10 years or your Chapter 13 listed after nine years, dispute the reports in writing. Send your letter by tracked, priority mail so you know that the correct office receives your letter.
If one or all of the credit bureaus refuses to remove the inaccurate information, then you may need to talk to a legal or accounting expert about your options. It’s the last thing that you want to deal with after years of bankruptcy, but it’s a final step that you much overcome to break free.
Bankruptcy does a lot of damage to your credit. Once the bankruptcy falls off of your credit history, though, your score may not return to its original number. Expect to take some time repairing your credit score so you can rebuild trust with financial institutions.
The following tips can help you recover as quickly as possible. In fact, you may be able to use them while your bankruptcy is on your record. Getting ahead never hurts!
If credit card companies don’t want to give you an account, then you should explore secured cards. Secured cards require you to give them a deposit that represents the full amount that you can borrow. Basically, you’re paying ahead to use the card.
You may only qualify for $300. If that’s the best option you can find, take it. It’s not great, but it’s a place to start rebuilding.
Paying bills on time shows that you budget your money wisely and prioritize your debts. The day that you receive a bill from your utility company, credit card company, cable company, or anyone else, pay the full amount online or by sending a check through the mail.
Do not miss a single bill. It could send you back to square one.
Spend some time identifying what forced you into bankruptcy. Did you spend too much money on housing? Did you take lavish trips? Did you simply spend more than you could afford eating at restaurants?
If you haven’t already made a budget, create one now. It should include every dollar you earn, spend, and save. Count everything so you have an accurate picture of how you use your money.
How long does bankruptcy stay on your credit report? Seven to 10 years. That’s a long time! Use the opportunity to reorganize your finances, learn frugal behaviors, and restrain your spending. With a little luck and a lot of hard work, your credit score and report can recover within at least 10 years. That will put you in a much better financial position.
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