How Long Does Bankruptcy Stay on Credit Reports?

Bankruptcy laws were created to provide Americans with a fresh start. Unfortunately, bankruptcies have negative effects on credit scores, making more difficult for some people to start over. It takes ten years for a Chapter 7 filing to come off a credit report. Chapter 13 may remain on the credit report for ten years but it is typically removed after seven years. Both types of bankruptcies carry less weight over time.

Contact Lenders to Negotiate Lower Interest Rates

Consumers with bankruptcies on their credit reports are not stuck without any ways of lowering rates on credit cards and loans. They can improve their credit by reviewing their credit reports from Equifax, Experian, and TransUnion and verifying that these are accurate, then contacting lenders to request a reduction in interest rates. This may be successful if the filing occurred several years ago.  If the individual is able to obtain a personal loan with a lower interest rate than a car loan, personal loan proceeds can be used to repay the car loan.

Impact on Credit Might Not Be as Bad as You Think

Many people hear horror stories about the effect of bankruptcies on credit scores so they avoid filing. According to financial experts, the damage to the credit score is not as bad as anticipated in many cases. This is because most people in debt do not enter bankruptcies with excellent credit scores. Over time, some may even be able to achieve high enough scores to qualify for competitive credit terms.

It may be difficult to initially obtain credit post bankruptcy, and understanding your credit score is an important aspect of it. Credit card offers will typically include high interest rates and low spending limits. Personal and car loan applications may be rejected within the first year or two of a Chapter 7 or Chapter 13 discharge. The applicant may need to request a smaller loan or may need to obtain a co-signer. After several years of responsible financial management, obtaining credit should not be an issue.

Rate of Bankruptcy Filings Nationwide is Decreasing

U.S. Bankruptcies were on the rise since the 2008-2009 recession but they declined drastically during 2011, falling by 12 percent. According to some experts in 2015, consumers are now spending more cautiously. However, those with a more skeptical view say there are fewer Americans who can benefit from filing for Chapter 7 or Chapter 13 bankruptcy. This is where bankruptcy attorneys come in, as they are the only real judge of an individual’s options.

Less than 1.37 million bankruptcy cases were recorded during 2011 in the U.S., reports Epiq Systems. This figure stood at nearly 1.55 million in 2010. Some debt experts point out that this mirrors consumer spending, which is characterized by a drastically changed debt landscape during the past two years. Utah was the only state to experience an increase in filings during 2011 and the figure was a mere one percent.

When considering whether bankruptcies are for them, Americans should look past the impact on their credit reports. If they have decent income, creditors will be more likely to offer credit. Interest rates may not be the most attractive but the credit may be available even if a bankruptcy is still on the credit report. Of course, the most important thing to do is speak with a bankruptcy attorney that provides a free consultation because that is the only way to find out what option is best for your particular case.