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How Long Does Bankruptcy Affect My Credit Score?

By The Golden Law Group

As of August 15, 2015, Americans owe a total of more than $11 trillion in debt for credit cards, mortgages, student loans, and other expenses. With that number in mind, it should come as no surprise that many Americans choose to file bankruptcy to help relieve their debt burden and start fresh.

Although bankruptcy is an effective way to get relief from overwhelming debt, it is not without consequences. Specifically, bankruptcy will impact your ability to open new credit lines for some time after the process is complete. There are ways to improve your credit in the meantime, but it can take as long as a decade before the bankruptcy is off your record.

Chapter 7 vs. Chapter 13

The two main types of bankruptcy for consumers are Chapter 7 and Chapter 13. Chapter 7 is what comes to mind when most people think of bankruptcy, as it completely clears many, if not all, of your unsecured debts. Since many creditors are not paid back via Chapter 7, this type of bankruptcy will stay on your record for 10 years.

Chapter 13, on the other hand, is more of a reorganization of debt. You will still owe the money (or at least a chunk of it), but it is organized into an affordable payment plan to help you regain control over the situation. Since the creditors obviously like Chapter 13 better, as they will get much of their money back, this type of bankruptcy will remain on your record for 7 years.

Can I Improve My Credit Score Before Bankruptcy Disappears?

It’s certainly not impossible to obtain a home loan, auto loan, or open a credit card after bankruptcy, but it can be more difficult. If your credit was particularly bad before the bankruptcy, you will likely have trouble qualifying for any large or premium credit lines.

However, there are many steps you can take to begin rebuilding your score. Perhaps the most important thing to do after bankruptcy is paying your bills on time. The credit bureaus actually monitor several types of bill payments even if they aren’t related to a loan, especially rent payments. After the bankruptcy is a year or so behind you, you can try applying for a secured credit card. These cards require you to put up cash collateral, and report card activity to the bureaus like a traditional unsecured card.

Considering Bankruptcy? Call Our Firm Today.

For those who are feeling overwhelmed by tax debt, the benefits of bankruptcy can far outweigh the consequences. If this sounds like you, call The Golden Law Group today. Our Brandon bankruptcy attorney is a Board Certified Specialist in consumer bankruptcy law, giving him a unique understanding of the finer points of Chapter 7 and Chapter 13 cases.

Harassed by collection calls? Call our firm today at (813) 680-3830 for your free case evaluation.


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