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What’s the Difference Between Chapter 7 and Chapter 13 Bankruptcy?

From a credit reporting perspective there is one fundamental difference in the two bankruptcy chapters. Under Chapter 13 bankruptcy you must repay at least a portion of the debt. Under Chapter 7 bankruptcy, you don’t repay any of the debt.

Because you repay a portion of the debt under the terms of the Chapter 13 bankruptcy, the bankruptcy public record only remains on your credit report for seven years from the filing date. Under Chapter 7 bankruptcy, because you don’t repay any of the debt, the bankruptcy public record remains on your credit report for 10 years from the filing date.

Bankruptcy is the most negative thing that can appear in your credit history and will have a very serious and long term impact on your credit scores and creditworthiness.

To help you get back on track faster, try to keep an account open and make small charges that you can easily pay off in full every month. The positive payment history after the bankruptcy will help to rehabilitate your credit history a bit faster.

Rebuilding your credit will take time but having continuous positive payments reported will demonstrate that you are managing debt well. Eventually, the accounts that were included in bankruptcy will fall off and the positive history will remain.

You can find more information on the difference between Chapter 7 and Chapter 13 bankruptcy on the Ask Experian blog.

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Scoped on: 2/9/2017

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