Bankruptcy filings in the United States hit a record high in 2010, reaching 1.53 million. That number has since gone down significantly. In 2018, there were only about 770,000 new bankruptcy applications.
That being said, filing for bankruptcy isn’t an ideal situation to be in. It can negatively affect your financial life for a long time. This is because it has a detrimental effect on your credit score.
But the big question is: How long does a bankruptcy stay on your credit report?
It all depends on the type of bankruptcy you file for. Continue reading for a more detailed explanation.
Chapter 13 Bankruptcy
If you’re in a situation where your income isn’t enough to settle your outstanding debts and your lenders are pursuing your assets, you can file for Chapter 13 Bankruptcy.
If granted, asset seizure proceedings such as home foreclosure will stop immediately. You’ll have the opportunity to sit down with your lenders and draw an alternative repayment plan that suits your current financial situation.
Unfortunately, the bankruptcy will stay on your credit report for a period of up to seven years. What’s more, some of your debts that are discharged under this bankruptcy could stay on your report for longer than the bankruptcy itself.
Under Chapter 13, any alternative repayment plan can only be up to a maximum of five years. So if you let a debt go into collection within the period of the new plan, it’ll stay on your report for a further seven years, regardless of whether you clear it.
Chapter 7 Bankruptcy
When you owe money and you’re completely unable to pay up (you have no income), a Chapter 7 Bankruptcy could be ideal for you.
Once your petition is approved by a bankruptcy court, an appointed trustee will sell (liquidate) your assets and use the proceeds to pay any individual or organization that you owe. The court will also issue a discharge, which means lenders will have no legal right to claim payment after you’ve filed for Chapter 7.
So, how long does this bankruptcy stay on your credit report? Typically up to 10 years. Discharged debts will also stay on your report, but for no longer than seven years.
Individuals who file for Chapter 7 must also attend a credit counseling program.
Is Filing for Bankruptcy the Right Move?
Filing for bankruptcy isn’t an easy decision to make. The prospect of your credit score taking a major hit means you might not be able to access credit, or if you do, you’ll be slapped with higher interest rates.
This is why you need to consult with a competent bankruptcy attorney, such as Erin Shank. This professional will evaluate your financial situation and advise whether bankruptcy is the right move for you.
How Long Does a Bankruptcy Stay on Your Credit Report? Answered!
When you’re looking to seek bankruptcy protection, it’s understandable that a question like “how long does a bankruptcy stay on your credit report?” will linger in your mind. The short answer is no more than 10 years, but that will depend on the type of bankruptcy.
All the best and keep reading our blog for more helpful tips and insights.