How Chapter 7 Bankruptcy Can Affect Credit

Bankruptcy is often portrayed as a “last hope” for individuals or businesses facing overwhelming debt. But Connecticut residents should be aware that a great deal of misinformation is also disseminated about how bankruptcies like Chapter 7 influence an individual’s credit score. While the news is not always uniformly positive, in the long run bankruptcy can turn out to be the best financial decision an individual can make. 

It is commonly believed that bankruptcy information remains on a credit report for 10 years. In truth, only the public record of a Chapter 7 filing remains for that long. Other bankruptcy references on a credit report last a maximum of seven. As these issues begin to disappear from a credit report over that time, many individuals experience a more positive credit score. 

While it is true that a lower credit score typically follows a bankruptcy filing, intelligent credit management can dramatically reduce the time it takes to rebuild credit. Some individuals have reported that seeking secured credit cards or small installment loans following a filing can see their score rise to the “healthy” score range inside of only four or five years. Of course, this requires timely payment of any new credit or loans. 

Chapter 7 bankruptcy can sound dramatic, and while it is a major financial undertaking, the benefits may outweigh the cost. For Connecticut residents seeking a way to satisfy collection agencies, or even those simply facing overwhelming debt, filing for bankruptcy can give them a chance to get back on their feet. In the not-too-distant future, with good habits in place, credit can be rebuilt and that individual can resume their new, financially healthy lives. 

Source:, “7 Common Myths About How Bankruptcy Affects Credit“, Barry Paperno, March 16, 2018