Filing for personal bankruptcy is a major decision. It will result in the closure of your revolving lines of credit. If you are successful, your bankruptcy will lead to the discharge of the remaining balance on your unsecured lines of credit. A Chapter 7 bankruptcy could lead to a discharge just a few months after you initially file if you follow the process properly, while a Chapter 13 bankruptcy will take several years to complete.
However long the process takes, you will have a bankruptcy on your credit report that will limit what new credit opportunities you have. How long will your recent bankruptcy affect your credit opportunities?
Bankruptcy won’t affect your credit score forever
The good news for those contemplating bankruptcy is that a successful filing will only affect their creditworthiness for a fixed amount of time. In Chapter 7 liquidation bankruptcy, a discharge will remain on someone’s credit report for 10 years. However, many people start qualifying for credit cards within a few weeks of discharge.
They could get a vehicle loan within a year or two and the mortgage not long after that. Provided that someone actively works to rebuild their credit, the effect of the bankruptcy on their creditworthiness will slowly diminish each year until the blemish finally comes off of their credit report for good.
In a Chapter 13 bankruptcy, the person filing has to make payments for several years, usually three or more, before they received their discharge. Because of the longer process, the credit bureaus will only report the bankruptcy discharge for seven years, like they would any other issue with someone’s credit history.
You are in control of your credit after a bankruptcy
Once you discharge your credit card debts, medical debts and other unsecured debts, you will be back in control of your own finances. You will have the opportunity to sign up for a new credit card after your discharge. Paying your balance in full every month and slowly adding new lines of credit will help you quickly improve your credit score.
Learning more about what filing for personal bankruptcy will mean for your future credit options can help you plan your financial future during this challenging time.