When Does Bankruptcy Fall Off My Credit Report?

Dear JFH,

Bankruptcies are removed based on the date they were filed, but the type of bankruptcy determines how long the record of it will remain on your credit report. The two most common types of bankruptcy filed by consumers are Chapter 7 and Chapter 13.

Differences Between Chapter 7 and Chapter 13 Bankruptcy

With a Chapter 7 bankruptcy, most of your assets are liquidated, so you will not continue making payments on the accounts once they are included in the filing. Chapter 7 bankruptcies are usually discharged about three months after they are filed, and they remain on credit reports for 10 years from the filing date.

Unlike Chapter 7 bankruptcy, a Chapter 13 bankruptcy is an adjustment of debt plan, which means that you will repay a certain portion of the debts you owe. A Chapter 13 repayment plan usually lasts anywhere from three to five years, and your bankruptcy is not discharged until your repayment plan is complete. Because you do repay a portion of the debt you owe, a Chapter 13 bankruptcy is removed from your credit history sooner: seven years from the file date.

Accounts Included in Bankruptcy

When you include an account in your bankruptcy filing, the lender will update the account to show the status as "included in bankruptcy." Once the bankruptcy is discharged, the status will be updated again to show that it has now been "discharged" in bankruptcy.

Whether you file Chapter 7 or Chapter 13, an account that was never late and then included in bankruptcy will be removed seven years from the bankruptcy filing date. If the account was delinquent at the time it was included in the bankruptcy, it will be removed seven years from the original delinquency date on the account. In both cases, accounts included in bankruptcy will continue to show the payment history on the account prior to the bankruptcy status.

Rebuilding Credit After Bankruptcy

Bankruptcy is the single most negative thing that can happen to your credit history, so filing for bankruptcy should always be considered a last resort. If you are struggling to make your debt payments, there may be other options you can explore first, such as credit counseling or debt consolidation.

For instance, if your credit is good enough to qualify for a low-interest loan or credit card, consolidating your balances into one account can help you lower the overall amount of your payments each month and make it possible for you to continue meeting your obligations without filing for bankruptcy. However, you should be wary of any debt consolidation or debt management companies that encourage you to miss payments in order to qualify for debt settlement with your lenders. Also, you should know that while settling a debt for less than the full balance owed is better than not paying it at all, a settlement is considered negative and will likely hurt credit scores, even if you've never made a late payment on the account.

Even with the best intentions, sometimes bankruptcy is necessary. If you are trying to rebuild your credit after bankruptcy, here are some steps you can take:

• Make sure all payments are on time going forward. Sometimes, the bankruptcy court will allow you to keep certain accounts open. If you still have open and active accounts that were not included bankruptcy, be sure to make every payment on time.
• Open a new account. If you are starting from scratch with no remaining open accounts, it can be difficult to qualify for new credit after bankruptcy. Consider opening a secured credit card, getting a credit-builder loan, or asking a friend or family member to add you as an authorized user on their credit card. Making small purchases and then paying the balance in full each month will help build a positive payment history, which in time can help offset the negative impact of the bankruptcy.
• Check your credit report frequently. Stay on top of your credit situation by reviewing your credit report often. You can also request your free credit score from Experian, which will include a list of the top risk factors impacting your scores.
• Sign up for Experian Boost^®ø. Adding your on-time cellphone, utility, and streaming service payments with Experian Boost can help you increase your credit score so you can start to rebuild after bankruptcy.

Thanks for asking.

Jennifer White, Consumer Education Specialist