How Long Does Bankruptcy Appear on a Credit Report?

In the first nine months of 2021, 14,662 Texans filed for protection under the bankruptcy code. Most of them – 9,507 or 65 percent – chose Chapter 7 liquidation, while 30 percent, or 4,441, opted for reorganization and repayment under Chapter 13. The others, because of high debt or owning a business, relied on Chapter 11.

Bankruptcy is a word that strikes fear in many, even among those facing overwhelming debt loads that render life uncomfortable and stressful. Bankruptcy, however, truly does offer a fresh start. The bill collectors have to quit calling, and depending on your circumstances, you can often keep all or most of your possessions while eliminating unsecured obligations.

Bankruptcy, of course, is not without its consequences, one of which is what happens to your credit score and credit report. Even here, things aren’t as bad as many might believe.

If your debts are overwhelming you and bill collectors are hounding you, you need to consider the relief that bankruptcy offers. If you’re located in or around McAllen Texas, or nearby in Brownsville, Harlingen, Corpus Christi, or anywhere throughout the Rio Grande Valley, contact Oliva Law Bankruptcy to discuss your options. 

With our 15 years of experience, we can assess your situation, advise you of your best option, and then navigate you through the bankruptcy process.

Bankruptcy and Your Credit Score

A study by the Federal Reserve Bank of Philadelphia, using data obtained from consumer credit reporting agency Equifax, found that those who filed for bankruptcy usually experienced a sharp credit score decline in the 18 months prior to filing. Once filing for bankruptcy protection, their scores actually rose a bit on the Equifax scale, which ranges from 280 to 850.

Chapter 7 filers, on average, entered bankruptcy with a credit score of 538.2 and after discharge, saw their score rise to an average of 620.3. Chapter 13 filers saw their scores rise from 535.2 to 610.8.

Though all this sounds optimistic, there’s still the issue that a bankruptcy will stay on your credit report for years after you’ve been discharged and become basically debt-free.

Chapter 13 and Your Credit Report

Chapter 13 is a bankruptcy plan that allows you to consolidate all your debts into one lump sum, which you then repay from your disposable income over a three- to five-year period. Chapter 13 is often called the wage earner’s plan because you must have monthly income sufficient enough to cover repayment, even if your debt load itself is reduced.

A Chapter 13 filing will stay on your credit report for seven years, but remember that discharge itself is going to take three to five years, during which you cannot assume new credit without court approval. 

Chapter 7 and Your Credit Report

Chapter 7 is a liquidation plan, whereby your non-exempt assets are sold off to satisfy creditors. If that’s the case, you may ask, then why did most people this year choose Chapter 7? There may be many answers, but one is certainly Texas’s generous exemptions offered under bankruptcy.

Texas law allows you to keep a personal home of almost any value, along with one car for each family member (subject to an overall cash-value cap). Another reason could be the speed of discharge. A Chapter 7 should generally be over and done within six or so months.

The downside is that Chapter 7 stays on your credit report for 10 years.

Rebuilding Your Credit After Bankruptcy

Another study by the Federal Reserve Bank of Philadelphia found that lenders tend to be more lenient to consumers exiting Chapter 7. The main reason for this, the study found, is that people can file Chapter 7 only once every eight years, while Chapter 13 filers have to wait only two years to file again.

Other consumer watchdog groups tend to disagree, arguing that paying off at least a portion of your debts through Chapter 13 is better than voiding all unsecured obligations through Chapter 7.

Be that as it may, once you exit bankruptcy, the only way to rebuild your credit is to take on debt and repay it responsibly and on time. This can be done in a variety of ways.

You can obtain a secured credit card, meaning you make a deposit and a credit card is issued in that amount. Another way is through a credit builder loan. The bank will make you a small loan, $500 or maybe $1,000 or more. Once you repay the loan, the money is yours. Both these methods will help increase your credit score if you make timely monthly payments.

How Legal Counsel Can Help

Filing for bankruptcy can indeed give you a fresh start financially and in life in general, but the process is not that easy to navigate if you try to do it yourself.

If you opt for Chapter 13, you have to come up with a repayment plan that satisfies your creditors at a court-mandated meeting. If you opt for Chapter 7, you have to honestly prepare a list of debts and assets and make sure you meet the exemptions offered by Texas bankruptcy law. Even choosing between the two can be difficult.

If you’re in the Rio Grande Valley area of Texas or McAllen, contact Oliva Law. We will assess your financial and personal situation, guide you toward the best course of action, and then stand by your side as you rebuild your life and finances through bankruptcy.


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