What is the effect on your credit after you file for bankruptcy?

A Chapter 13 case stays on a credit report for six years, and drops off the report after seven years. A Chapter 7 bankruptcy will stay on your credit report for ten years. Debts included in a bankruptcy filing should be noted as such on the updated credit report.

When you apply for a loan, most lenders have no interest in anything other than your FICO score. Frankly, they haven't got the time to look at you this carefully. Your nosy neighbor or inlaws could find out this information for less than $10 by just going to the federal court website. When you filed bankruptcy, the bankruptcy did lower your FICO score quite a bit. However, having less debt increases your score and not having delinquent payments month after month not further lowering your score a make an increase in your credit score in a fairly short period of time, if you manage your finances wisely. There is, however, no one size fits all answer to this concern. Hope this perspective helps!

Bankruptcy can be a great opportunity to clean up your credit. It stops the reporting of the negative credit each month (late payments, missed payments, only partial payments, etc.) and also reduces your debt to asset ratio by wiping out most of your unsecured debt (with some exceptions, such as most taxes, alimony, child support, student loans, government fines/debts). The result of this will usually mean an increase in your credit score relatively soon after your debts are discharged. The increase can be substantial. However, if you don't get things back on track after the bankruptcy, and you continue having problems making payments on time and/or you get sued for debts you can't/don't pay, it's not likely that your credit score will improve, and you will have wasted the opportunity to truly get a fresh start. If the creditors have reported your debt correctly after your bankruptcy discharge you should be able to see notations that indicate the debt has been discharged in bankruptcy. However, there is no guarantee creditors will report correctly, so it's a good idea to check your credit reports from all three bureaus about 90 days after your discharge to make sure there aren't any errors. If there are errors the bureaus have forms you can fill out to dispute how the debt is being reported.

Under the Fair Credit Reporting Act, any bankruptcy can be reported for 10 years from the date of the case filed. Generally though credit bureaus report chapter 13's for 7 years from the date of filing. Also, after your discharge is granted, the credit report should show on the trade line for all debts "included in bankruptcy, and $0 balance."