What Happens To a Credit Score After Bankruptcy?

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Even if you are in an overwhelming amount of debt, experts advise that you consider carefully before making the decision to declare personal bankruptcy. Filing for bankruptcy has a big effect on your credit rating and can affect your ability to get any form of credit, including credit cards, auto loans, and mortgages, for many years to come.

How a bankruptcy affects your credit score depends largely upon which type of bankruptcy you file for. The two most common types of personal bankruptcy are known as Chapter 13 (reorganization) and Chapter 7 (liquidation). You may have also heard of Chapter 11 bankruptcy, but that type of bankruptcy is declared by corporations, not individuals. Even if you could qualify for it, it would not discharge your credit rating.

In the case of a Chapter 7 bankruptcy, the filing remains on your credit history for 10 years. A Chapter 13 bankruptcy remains on your credit record for 7 years. In either case, your credit score will plunge, and you will not be able to get any type of credit line during that time. Experts say that declaring bankruptcy can lower your credit score by as much as 200 points. This can be a big hurdle to overcome when you are looking for credit in the future.

After the seven or ten year period is up, your credit score may not automatically go back to where it was before. You may still need to contact creditors and the credit bureaus to remove items from your record. Talk to a credit counselor before making any decisions about whether to declare bankruptcy. Even if you have some late payments or even charge-offs, those will not affect your credit rating as severely as a bankruptcy will.

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From a credit perspective, you should consider every other possible alternative before resorting to a bankruptcy filing. Personal bankruptcy will remain on your credit report for many years, and will be revealed to potential employers and lenders whenever they run a credit check. You should think carefully before declaring bankruptcy and only consider it as a last resort.


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