How long does bankruptcy stay on your credit reports?

Depending on the type, bankruptcy can stay on your credit reports for up to 10 years.

Here’s a look at how bankruptcy impacts credit.

What you’ll learn:

• Chapter 7 and Chapter 13 are the two most common types of bankruptcy that individuals can file.

• A Chapter 7 bankruptcy may stay on credit reports for up to 10 years from the filing date.

• A Chapter 13 bankruptcy generally stays on credit reports for seven years from the filing date. 

• Bankruptcy can affect credit scores for as long as it’s part of someone’s credit reports.

A Chapter 7 bankruptcy can stay on your credit reports for up to 10 years from the date you file bankruptcy. Once the 10-year period ends, the bankruptcy should fall off your credit reports.

Chapter 7 is a type of bankruptcy that involves the debtor selling their property to pay back creditors. It’s also known as a liquidation bankruptcy. 

Not all property, or assets, must be sold as part of Chapter 7. Exempt assets can include the essentials necessary to rebuild, like primary residence, tools for work and Social Security benefits.

The assets that must be sold are known as nonexempt. Some examples of nonexempt possessions might include vehicles, jewelry or bank funds.

 Each state dictates which assets are nonexempt and exempt. There are also federal exemptions.

In most cases, a Chapter 13 bankruptcy stays on a credit report for up to seven years after the bankruptcy filing date. Once seven years have passed, the bankruptcy should come off credit reports.

A Chapter 13 bankruptcy is sometimes called a reorganization bankruptcy, because debtors can restructure their debts under a court-supervised bankruptcy plan. That means individuals work with the court to establish a payment plan to repay creditors.

A bankruptcy filing typically appears in the public records section of credit reports. If any accounts are listed as part of the bankruptcy, you might also see the bankruptcy in the account information section.

No one reports bankruptcies to the credit bureaus. But bankruptcy filings are typically public records, which the three major credit bureaus, Equifax®, Experian® and TransUnion®, can access. Credit bureaus actively collect public records information from courts to keep credit reports up to date.

According to FICO®, the effect of bankruptcy on credit scores depends on the type of bankruptcy, your current credit scores and the number of accounts included in the filing, among other factors. 

When you apply for new credit, creditors and other organizations may review credit reports and consider the bankruptcy filing.  So you may have a hard time qualifying for new credit accounts with favorable terms. 

Bankruptcy could also impact things like renting an apartment, opening new utility accounts, finding a job or qualifying for lower insurance premiums. 

The impact of bankruptcy can diminish over time, according to FICO.

If the bankruptcy filing is accurate, you can’t remove it. But credit bureaus should stop reporting it after seven to 10 years.

As with any errors you find on your credit reports, you may dispute a bankruptcy filing that you think is incorrect with the credit bureau. Information that’s found to be accurate can’t be removed from a credit report.

Bankruptcy can hurt credit scores. But it’s possible to start rebuilding credit even before the bankruptcy falls off your report. Here are some places to start.

• Practice good credit habits. Using credit responsibly can help you improve your credit scores. That means making on-time payments, staying under your credit limit and avoiding too many new credit applications.

• Monitor your credit reports and scores. Regularly checking credit reports and scores can help you keep track of your progress and spot any errors. You can get free credit reports from each of the major credit bureaus by visiting AnnualCreditReport.com. There’s also CreditWise from Capital One. It’s free, and using it won’t hurt your scores. 

• Get a credit-builder loan. When you apply for a credit-builder loan, the funds are set aside in a locked savings account, and you make monthly payments. Your payment history typically is reported to the bureaus, which can help your credit if your payments are on time. The lender turns over the balance when you pay off the loan, and you can use the funds however you want.

A Chapter 7 bankruptcy can hurt credit and stay on credit reports for up to 10 years. A Chapter 13 bankruptcy can stay on credit reports for up to seven years.

With patience and good credit habits, it’s possible to rebuild your credit after a bankruptcy. You can consider a Capital One card for fair and building credit to help you meet your goals.