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O'Bryan Law Offices
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How can bankruptcy affect a credit report?


How can bankruptcy affect a credit report?

While no one wants to file for bankruptcy, it can be a useful tool for some people to deal with overwhelming financial obligations. Filing for bankruptcy will likely negatively affect a person’s credit, but the good news is that the damage can be repaired.

Bankruptcies are public records and listed on credit reports. A Chapter 7 filing can appear for 10 years. A Chapter 13 bankruptcy usually stays for seven years but can remain up to 10 years if certain conditions aren’t followed.

How a bankruptcy filing appears on the report

Before filing, debts such as medical bills, credit cards and more may appear as “unpaid” or “past due” along with the balance owed. For accounts included in a bankruptcy, they are listed on the credit report as “discharged” or “included in bankruptcy” with a zero balance.

Creditors will take that into account when someone applies for credit and may even deny the application. However, the good news is the accounts will no longer be reported as “unpaid” or “past due” which will help rebuild a person’s credit score.

Post-bankruptcy credit recovery

After a bankruptcy filing, it will take about two months for it to show up on a credit report. The report should be examined frequently for potential errors which must be corrected. With responsible financial behavior, credit scores will slowly start to rise.

The decision to file for bankruptcy can be a difficult one. However, for some people, it can be a positive step to rebuilding their financial freedom. An experienced attorney here in Kentucky can detail the best options and dispel some common misconceptions over the impacts of a bankruptcy filing.