Bankruptcy is a state where individuals who owe money to their creditors (be those banks, financial sectors, or private loans) can't meet their debt obligations.
It doesn’t necessarily matter if the need for bankruptcy was due to bad financial decision-making or just bad luck, a second chance is typically allowed by the courts.While it may make an impact on your credit score initially, a bankruptcy allows individuals to recover from their financial situation and start with a clean slate.
Working with an attorney will help develop a strategy for recovering from your financial situation and determine the best course of action for your specific needs going forward.
How Long Does a Bankruptcy Stay on Your Credit Report?
The time it will take you to clear your bankruptcy off of your credit report depends on the type of bankruptcy you have filed for and the volume of the debts you have to clear. However, most bankruptcies remain on your credit report for about the same time as a late payment.
Here's the basic breakdown of how long different types of negative information will remain on your credit report:
Late payments: 7 years
Bankruptcies: 7 years for completed Chapter 13 bankruptcies and 10 years for Chapter 7 bankruptcies.
Foreclosures: 7 years
Collections: About 7 years
Public Record: 7 years
Chapter 13 bankruptcy
In a Chapter 13 bankruptcy, you enter a repayment plan to reconcile your debt. This does not mean that all of the debt that you owe will be paid in full. This program typically takes 3 to 5 years to complete. Once this plan is completed, any general unsecured debt that is not paid in full is eligible to be discharged (eliminated).
The completed Chapter 13 bankruptcy, along with the accounts that were included in the program, should disappear from your credit reports about seven years after the filing date. Before the filing of this bankruptcy, the ineligible accounts would also be removed from the report at a sooner interval.
Keep in mind that a bankruptcy’s impact on your credit score lessens over time and that starts when you initially file for bankruptcy. From the time you begin your Chapter 13 repayment plan, your credit score will start to increase even before the plan is completed.
Chapter 7 bankruptcy
If you decide to pursue a Chapter 7 bankruptcy, then it will generally take 10 years to dissolve from your credit reports. A bankruptcy trustee is appointed to your case and will liquidate all of your nonexempt assets to pay the creditors. Once these assets are sold off, any debt that still remains will be discharged.
These discharged debts will be listed as 'included in bankruptcy' or 'discharged' with a likely balance of $0 on your credit report. The accounts should fall off from your credit report about seven to ten years from the day you filed for this type of bankruptcy.
Recovering from a Bankruptcy
Bankruptcies are designed to give you a second chance with your finances. Once you have a completed your bankruptcy, there are ways to speed the recovery of your credit score.
- Make sure you report the right accounts.
After the discharging of the debts, you should review your credit reports and make sure that only the accounts that were a part of your bankruptcy are listed and nothing more. Only these accounts should be listed as 'discharged' or 'included in bankruptcy.' If you find some likely errors, then feel free to report these to the credit bureau; it might take a few months for the reports to reflect the amendments. - Rebuild your credit with a secured card
After your bankruptcy is over, it is necessary that you get your hands on a secure credit card. Ensuring that you make all of your current payments with the secured card while keeping the utilization rate low could help you improve your credit over time. Also, make sure that you pay for your credit card on time, and there are no late fees and such. - Review all the reports once your bankruptcy is complete
You should not leave the process of exempting bankruptcy for your reports to the credit bureaus since mistakes are often made. Once your bankruptcy period is over, you must review all of your reports and check again that bankruptcy was removed. If you have questions or see inaccurate results once your bankruptcy or repayment plan is complete, contact your attorney to find the best course of action on making those corrections
Filing for bankruptcy can be a difficult decision, but if you have no other way to make up for your debt, then it is the right thing to do. Your credit would be hurt for some time, but if you continue to stick with the key points of your bankruptcy filing and amend your credit mistakes, it will help you rebuild your credit in due time. It is all about taking the lesson home with you; if you do it right, then bad credit won't be haunting you after the bankruptcy period is over, and you will not only be able to account for bad credit but rebuilding your business as well.
Count on an Attorney You Can Trust
Acclaim Legal Services specializes in helping people in Michigan gain a fresh financial start through the use of a Chapter 13 Reorganization Plan or a Chapter 7 Fresh Start program.
The goals for our clients are always to:
Improve and repair their credit
Resolve emergency issues such as home foreclosure, car repossession, wage garnishments, etc. Filing for bankruptcy offers court protection from creditors as soon as the case is filed. We offer same day legal protection.
Create a stable financial future through debt elimination, debt consolidation or debt settlement.
Minimize and eliminate the stress that comes with financial difficulties
We have been in practice for over 18 years and have over 120 years of combined legal experience in debt resolution law to offer our clients. We have six convenient offices located in Detroit, Southfield, Ann Arbor, Warren, Dearborn and Flint, Michigan.
Call today to speak to a qualified bankruptcy attorney at 866-261-8282 orschedule an appointment online.
