Chapter 7 bankruptcy will stay on your credit report for 10 years

No, bankruptcy does not stay on your credit report forever.

If you file for chapter 7 bankruptcy, it will be reflected on your credit report for 10 years. A chapter 13 bankruptcy will stay on your credit report for 7 years from the date the case is filed.

Keep in mind that financial distress will usually cause damage to your credit, even before you file bankruptcy. If you’re considering bankruptcy, check your credit. It could be that past due accounts have already dropped your score, preempting any damage a bankruptcy may cause.

Further, debts that are discharged in bankruptcy will show up on your credit as having a zero balance. Why is this important? One of the factors lenders consider when extending credit is debt load. The more debt you have, the harder it will be to maintain new debt. The recently bankrupt is often seen as a decent credit risk because they have low debt to income ratios and won’t be able to file bankruptcy again for years.

Many who have recently filed bankruptcy are surprised to learn just how quickly they begin to receive offers for credit cards in the mail. Although offers for new credit can be encouraging, especially after an event like bankruptcy, be careful to consider the terms carefully. Many credit cards will try to charge high interest and application fees.

Although chapter 7 bankruptcy does stay on your credit for 10 years, responsible use of credit can re-build your score quickly. The negative effect of a bankruptcy weakens over time. Lenders underwriting a possible loan will not be as concerned with bankruptcy once the consumer demonstrates that they are more than capable of using credit responsibly. Don’t spend more than you earn, live simply, pay bills on time and don’t keep balances on credit cards. Follow these simple rules and your credit score will improve. Good luck.