How Long Does Bankruptcy Stay On My Credit Report?

Credit Report in Arizona

One of the first things that come to mind when you think about bankruptcy in Arizona is the impact on your financial status and how long the case stays on your credit report. It is understandable that many people would focus on what seems to be a drawback for filing Chapter 7 or Chapter 13 bankruptcy.

However, if you are considering bankruptcy, the benefits of a clean financial slate are even more important. Once the bankruptcy case is over, there are advantages while the matter remains on your credit report. You are not being hounded by creditors, you do not owe what was already discharged, and you are not paying huge amounts that only go to interest and late fees.

When the bankruptcy case is removed from your credit rating, there are even more advantages. The benefits continue, as companies are willing to extend credit and provide loans once the case is gone. An additional advantage is that you may qualify for lower interest rates when you do take a loan. Of course, you must still only take on wise, well-planned debt that fits within your budget and still leaves plenty for your monthly expenses. 

Retaining legal counsel is essential for a smooth process, but it is also crucial to rely on an Arizona bankruptcy attorney for advice when the case is over. You can also read on for details on how long bankruptcy stays on your credit report.

Chapter 7 and Your Credit Report

If you go through a Chapter 7 bankruptcy discharge, the case remains on your credit report for 10 years. The start date is the date that you file your petition. There are multiple reasons that the time period is long:

  • Chapter 7 carries significant advantages for a debtor, but creditors are hit hard when debts are discharged. Having to take your debt off their books is a loss, and they will have to pass on costs in various ways.
  • US bankruptcy laws do not intend for Chapter 7 discharge to be a windfall for debtors. The goal is to eliminate the crushing debt and give them a fresh start, not support an ongoing cycle of incurring unmanageable debt and eliminating it. Requiring the bankruptcy case to remain on your credit report for a 10-year period is not meant to discourage someone from filing. However, the point is to ensure a filer considers options very carefully.

Fortunately, during the 10-year time period, there are some things you can do to improve your credit score. You will be that much farther ahead of the game when the Chapter 7 case is removed from your credit report.

Your Credit Report After Chapter 13

With a Chapter 13 debt repayment bankruptcy, the case will remain on your credit report for seven years from the date that you file. The consequences for creditors are not as severe, which is part of the reason for the shorter time period. Some points about Chapter 13 bankruptcy are helpful:

  • You will be able to discharge most credit cards, lines of credit, personal loans, and medical bills through Chapter 13, after completing the debt repayment plan.
  • Arrearages on your mortgage can be included in the Chapter 13 case, which means you pay down these amounts as part of your debt repayment plan without incurring additional fees. You will have to pay the mortgage amount during this time, but you do not have concerns about foreclosure because of the automatic stay on creditor efforts to collect. Chapter 13 enables you to keep your house.
  • During the Chapter 13 proceedings, you must complete a financial management course to help you avoid returning to a situation of financial hardship. This is also a requirement for Chapter 7. With this knowledge, you have the tools to improve your credit rating.

How Bankruptcy Affects Credit

It is one thing to say that bankruptcy stays on your credit report, but you might wonder to the full extent. In general, for Chapter 7 and Chapter 13, the case being part of your record is a negative mark. For instance:

  • Bankruptcy will likely prevent you from getting a mortgage or home loan.
  • There may be changes to your existing auto insurance policy, premiums, or deductibles. If you are procuring new insurance after bankruptcy, you might not qualify.
  • A credit check is part of employment, getting an apartment, signing a lease for a business, and arranging for your home’s utilities. You could encounter challenges.
  • A bankruptcy on your credit report affects your credit score, a different measurement of your financial situation. It will be hundreds of points lower when you file because the case goes on your credit report on that date. The matter remains there for the designated time period, but there are ways to leverage bankruptcy laws to improve your rating.

Tips to Improving Your Credit After Bankruptcy

There are ways to boost your credit score while the bankruptcy case remains on your credit report, as well as when the matter is removed. During the period when there is a mark on your credit report, you are considered to have poor credit but can still be building your rating. Once the case goes away, you are essentially a new individual with no credit history. Some recommendations for improving your credit after bankruptcy include:

  • Talk to your Arizona bankruptcy attorney about tips that will benefit your unique situation. 
  • Using what you learned through credit counseling and financial management courses, create a budget that works for your household. 
  • Keep monitoring your credit score. Make sure you are familiar with it and what the items on the report mean. When you watch your credit, you can see where to make improvements. You can also take action if any errors appear on your record.
  • For monthly bills, always pay in full and on time. Do not fall behind, because late fees and interest can soon make your financial situation unmanageable.
  • Check into credit cards that are aimed toward building credit. Many large banks offer options, and you may need to deposit funds to secure a card.
  • Look into a credit builder loan offered by some banks. You will not have to qualify as with a traditional loan, as you will be providing security through an account or certificate of deposit with the institution. 

What NOT to do to Avoid Future Financial Problems

For as many tips on tasks you should do after a bankruptcy, there are just as many things to avoid. The 7- and 10-year period that bankruptcy remains on your credit report will prevent you from taking steps backward because you will not be able to take on many forms of debt. There are some tips that are within your control, so you should understand a few points about what not to do.

  • Never incur more debt than you can afford based on your monthly budget.
  • Do not purchase luxury items on credit unless you can pay off the balance in less than a month.
  • Avoid problems in the future by creating an emergency savings fund to which you contribute regularly. You are less likely to charge expenses when you have a fallback.
  • Do not say “never again” to credit cards. Your credit can benefit from opening a secured credit card account, in which you make a deposit and borrow against it. With some banks, you can even convert your account into an unsecured credit card.

Your Finances with a Clean Slate

It is tempting to focus on how long a bankruptcy stays on your credit report while disregarding what happens beyond the 7- or 10-year period. For many people, the stress of creditor harassment is eliminated. When you file for Chapter 7 or Chapter 13 bankruptcy, there is an automatic stay. Plus, once you emerge from the case and it is off your record, you have no creditors to pay. The exception is any new debts you took on, utilities, phone bills, and other monthly expenses. 

In addition, you are a brand new consumer in the US economy, in a sense. You have a limited credit history, so there is nowhere to go but up with smart financial decisions. From a low credit score, you can boost your rating by taking on wise, planned debts and paying them off right away.

Legal Help Throughout the Process

Asking the simple question about how long Arizona bankruptcy stays on your credit report opens the door to a wealth of information. The laws are convoluted and complex, and you want to ensure you opt for the right bankruptcy type. There can be a big difference between 7 and 10 years, and you should leverage all benefits available.

With help from legal counsel, you can gain confidence knowing that you are following the right path for your situation. Once your case is over and during the period when the matter remains on your credit report, you can trust a bankruptcy attorney to:

  • Extend the information you learned in your credit counseling and financial management courses;
  • Counsel you on ways to improve your rating; 
  • Assist you in handling debts that will build your credit score;
  • Explain how co-signers may assist with boosting your credit; and,
  • Tackle many other tasks.

Count on Our Arizona Bankruptcy Lawyer to Advise You

Bankruptcy is an important decision, but it is important to weigh the pros and cons. Your choice should not be solely based on how long bankruptcy stays on your credit report, and the benefits are considerable. For more information on how we can help, please contact DebtBusters. You can call (866) 223-4395 or visit our website to schedule a free consultation at our offices in Scottsdale, AZ.

Related Content: What Are the Eligibility Requirements for Filing Bankruptcy in Arizona?