The bills aren’t paid, the collectors are calling, and you feel like you’re drowning in debt. Maybe you’re tempted to hit the bankruptcy button to make it all go away. But filing for bankruptcy doesn’t wipe your slate clean. There’s no guarantee it will erase all your debts, and it leaves a mark on your record that takes a while to disappear.
So, how long does a bankruptcy stay on your credit report? Legally, up to 10 years. Emotionally, much longer. Let’s take a look at exactly how long a bankruptcy can stay on your record and what to do if you’re trying to rebuild your life after a bankruptcy.
How Bankruptcy and Debt Affect Your Credit Report
Remember getting report cards in school? You were either super proud or super scared as you took that piece of paper home. As adults, we often treat our credit report the same way we treated our grades in school. Creditors want us to think having a low FICO score is the same as failing a test. But a credit report doesn’t show how you’re winning with money. It’s just a record of your relationship with debt. And believe it or not, it’s possible to live without a credit score.
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But there’s a difference between no credit and bad credit. One means you’re financially responsible enough to not have to borrow money. And the other means you’ve borrowed money and not paid it back on time—which can label you as a credit risk. So, while you don’t need A+ credit to do things like buy a car or rent a house, trashing your credit by not paying back debt or filing for bankruptcy won’t help you either. Here’s how bankruptcy and other unpaid debt can show up on your credit report:
Chapter 7 Bankruptcy
Chapter 7 is the most common type of bankruptcy. When someone files, they have to liquidate their assets—which means selling their stuff to pay back the people they owe money to. Chapter 7 also erases most unsecured debt (like credit cards or medical bills), but you can only file for this type of bankruptcy if the court decides your income is too low to pay back your debts.
A Chapter 7 bankruptcy stays on a credit report for up to 10 years after someone files for it.
Chapter 13 Bankruptcy
When someone files for a Chapter 13 bankruptcy, they work out a monthly payment plan to pay back some or all of their debt over three to five years. Most people are able to keep their assets (like a house or car) as long as they’re paid for or included in the repayment plan. This type of bankruptcy isn’t as harmful to someone’s credit as Chapter 7 because they still have to repay their debt instead of just having it wiped out.
But a Chapter 13 bankruptcy still stays on a credit report for up to seven years after someone files.
Other Types of Debt
- Late Payments: If you’re late on payments for anything from credit cards to medical bills, it can show up on your credit report—and stick around for seven years after the payment first became delinquent (aka late). Exactly when a payment is considered late depends on the lender. But you usually only have to be 30 days behind before the major credit bureaus (Experian, Equifax and TransUnion) get word and lower your credit score. Late payments usually have the biggest impact on your credit when they first show up on your report. And the longer you miss payments, the more it’ll affect your credit score.
- Collections: Once you’re about 90–120 days late on a payment, your debt goes into collections. This means a lender can sell your debt to a collections agency that will call you for money. And even if you’ve got old debt or debt that the creditor wrote off because they couldn’t get money from you, it can still show up on your credit report. Just like late payments, debt that’s in collections is taken off your credit record seven years after the account first became late and was never brought current again.
- Foreclosures: If you’ve missed a certain amount of mortgage payments (usually when you’re 120 days behind), a lender can foreclose on your house. This means the bank takes the property back and you have to move out. Not only can you lose your home, but you can also get at least 100 points knocked off your credit score. A foreclosure will fall off your record seven years after your first missed mortgage payment. But it can take a lot longer to get your credit score back to where it was before the foreclosure.
How to Remove a Bankruptcy From Your Credit Report
We hate to be a Debbie Downer here, but there’s not much you can do to take a bankruptcy off your credit report except wait the seven to 10 years it will take to legally disappear. And because it goes through a court, a bankruptcy also becomes public record. That means potential employers, banks, businesses and clients can all see the details of your bankruptcy as long as it’s on your credit report. Yeah, not fun.
But even if you can’t erase a bankruptcy from your credit report before that seven years is up, you can make sure nothing will slow down the process. So, once the court has officially forgiven your debts in a bankruptcy, double-check to make sure they’re marked as discharged on your credit report. This will show you’re no longer in the middle of a bankruptcy. And the more time that’s passed since a bankruptcy, the less it’ll affect your credit rating.
If you notice any errors on your credit report or if the bankruptcy is still showing up after it should’ve been taken off, you can contact the major credit bureaus to report the mistakes and get them fixed. You may come across “bankruptcy-removal services” that promise to erase stains from your credit report for a fee. But don’t pay a company to do something you can do yourself—just look over the details of your credit report and send a letter to the credit bureaus if you find a problem.
How to Build Your Credit After Bankruptcy
A bankruptcy is a devastating and life-altering event that can leave some serious emotional scars. But just because you’ve got bankruptcy or other negative info clouding up your credit history, it doesn’t mean your life is over. You can come back from a bankruptcy, and it starts with dusting yourself off and learning from your mistakes. Here are some ways to help rebuild your financial stability after a bankruptcy.
Stay on Top of Payments
Unfortunately, people (specifically businesses) won’t be as quick to trust you after a bankruptcy. It could be a while before you’re back on your feet. But the best way to prove you won’t end up in the hole again is by managing your money better. Go ahead and get yourself on a budget. When you give every dollar a job and focus on being more intentional with your money, you make it easier to pay your bills on time and stop overspending. Staying on top of payments, along with having a steady income, is one of the best things you can do for your credit after a bankruptcy because it shows you’re trying to be more responsible with your money.
And if you still have debts that weren’t erased in a bankruptcy—like student loans, government debt, reaffirmed debt (where you recommit to the terms of a current loan), child support or alimony—knock those out as soon as possible with the debt snowball method. Or try settling your leftover debts to get them out of your life as soon as possible.
Build an Emergency Fund
After a bankruptcy, saving money is the name of the game. You want to build yourself a nice emergency fund of three to six months of expenses to act as a cushion between you and whatever life throws at you. Because you’re never going back down the bankruptcy road again, right? And since you’re already in the money-saving mindset, you also want to make sure you’re saving up for the things you want and paying for them in cash. Yes, this requires a lot of patience, but it also means you won’t have to stress about making the payment on that sofa or car each month.
And if you’re wondering when you’ll be able to buy a house after a bankruptcy—it usually takes about two years of paying everything on time and having a stable income, as well as saving up a significant down payment, before you’re ready to purchase a home. But the good news is, there’s a way to get a mortgage without a credit score. It’s called manual underwriting, which looks at your income and payment history instead of your FICO score.
Kiss Credit Goodbye
It only takes a quick Google search to see that everyone wants you to rebuild your credit after a bankruptcy. But that’s like playing with snakes after you’ve been bit! Don’t push your luck—it’s time you stop trying to tame credit.
“Credit is what caused your bankruptcy. Why would you want to go right back into that?” — Dave Ramsey
You may also hear a lot of talk around secured loans or secured credit cards, which are marketed as “safer” options for people who have gone through a bankruptcy. But let’s get one thing straight—the only way to secure your wealth is by staying away from debt and credit altogether. Debt pulled you into this mess, and it’s not going to help you out of it. Consider it your lesson in how not to manage money.
How to Avoid Bankruptcy
A bankruptcy isn’t anyone’s first choice, but we know sometimes it feels like your only option. But it is possible to avoid bankruptcy. It starts with taking care of your Four Walls: food, utilities, shelter and transportation. Once you’ve got your home in order, it’s time to get aggressive by selling everything in sight, getting on a tight budget to cut unnecessary expenses, and snagging a side hustle to throw even more money at your debt. And you can always sit down with a financial coach who will guide you through your specific situation. Remember—it’s never too late to get help.
If you’re ready to cut credit from your life and say never again to bankruptcy, Financial Peace University (FPU) will show you how. You’ll learn how to pay off your debt, save and invest so you never have to worry about money again. Start FPU today!