Duration of a Chapter 7 Bankruptcy on a Credit Report

Bankruptcy is a common practice used by people all over America to recuse themselves from insurmountable debt. The two most common types available to Connecticut residents are Chapter 7 and Chapter 13 filings, both of which are used to reduce or discharge unsecured debts like credit cards, medical bills and more. But many questions frequently arise as to how filing for bankruptcy affects credit moving forward.

The most common question tends to be how long a bankruptcy filing will stay on a credit report. This varies between filing types, so it is important to understand the differences between the two. A Chapter 7 filing is essentially a liquidation in which some unsecured debts are paid through liquidating assets, while others are discharged by the court. A Chapter 13 filing reorganizes debts and creates payment plans for the debtor to effectively pay those debts back.

A Chapter 13 filing, because it is considered a reorganization rather than a liquidation, typically stays on a credit report for seven years. A Chapter 7 will stay for up to 10 years, but in both cases, there are many options available to rebuild credit before the filing is removed from a credit report. This can include opening a secured credit card, paying bills on time and applying for small loans.

Bankruptcy can be a frightening proposition for Connecticut residents afraid of ruining their credit forever. However, it is important to remember that neither a Chapter 7 filing nor a Chapter 13 reorganization is permanent. With the help of financial advisors and bankruptcy attorneys, a debtor can return to financial health, even in the face of a bankruptcy, and move forward in a positive fiscal direction.