Will Chapter 7 Bankruptcy Affect Your Credit For 10 Entire Years?
One of the downsides of filing for Chapter 7 bankruptcy is the effects it can have on your credit. This particular branch of bankruptcy will remain on your credit report for 10 years from the date you file, but this does not mean that your credit will be bad for the entire 10 years. Weighing the pros and cons of bankruptcy is always an important thing to do before you file, and here is some information you should understand about the effects of Chapter 7 bankruptcy on your credit.
If You Need To File, Your Credit May Already Be Bad
Yes, a Chapter 7 bankruptcy will remain on your credit report for 10 years, but this does not necessarily mean you will instantly have horrible credit. If you are in the position where you truly need relief through bankruptcy, it is very likely that you already have poor credit. Poor credit can occur from:
- Making late payments
- Allowing debts to go into collections
- Utilizing high percentages of available credit
You could look up your credit score before you file for bankruptcy. If you have a great credit score, filing might not be necessary. You might be able to find a different route to take that would not damage your credit score. If you discover that your credit score is already low, you should not be too concerned about the effects filing will have.
Filing Might Help You Improve Your Score Faster
One thing you should consider is filing for bankruptcy might actually help you improve your score faster. While the bankruptcy judgement will remain on your file for 10 years, there are some benefits filing can offer to your credit.
The number one benefit is that it will allow you a way to get rid of debts you owe instantly. Any debts included in the bankruptcy will be discharged. These debts will show up on your credit report as closed accounts with zero balances. This is helpful for your credit because it shows you do not owe any money.
The downside is that each account will be listed as part of your bankruptcy; however, many of these accounts may fall off your report sooner than your bankruptcy judgement will. Most regular debts fall off credit reports after seven years from the date of the last activity on each account. When a debt gets discharged, it will drop off your credit report seven years after this date.
If you cannot pay your bills and continue to get further in debt and incur more late payments on your accounts, it will only make your credit worse. At least when you file for bankruptcy, you can have a fresh start.
There Are Simple Ways To Improve Score
Finally, you should know that there are actually steps you can take to make your credit score go up after bankruptcy. One of the best things to do is apply for a credit card. You may need to get a secured credit card at first, but this can have positive effects on credit.
A second thing to do is dispute any items that are not accurate on your credit report. Disputing things on your credit is easy to do, but you must dispute each inaccuracy separately with each of the three major credit bureaus. By getting things corrected on your report and making all your payments on time, your credit could be good in a year or two after you file.
Your bankruptcy will stay on your credit report for 10 years, but this does not mean it will harm your credit the entire decade. Filing for Chapter 7 often has more advantages than disadvantages, and you can learn more by discussing your situation with an attorney like Wade Bettis, J.D., Ph.D., PC in your area.