Credit Score After Chapter 13 Discharge: What Happens? (2024)

FAQs

Credit Score After Chapter 13 Discharge: What Happens? ›

After your discharge from the Chapter 13 Bankruptcy, there will remain accounts. These accounts were current prior to the bankruptcy filing, for a period of up to 7 years. This will result in a potentially negative impact on your credit score. Even though your Chapter 13 Bankruptcy discharge may be fully complete.

Immediate Impact of Bankruptcy on Credit

A person with an average 680 score would lose between 130 and 150 points in bankruptcy. Someone with an above-average 780 score would lose between 200 and 240 points.

A Chapter 7 bankruptcy can stay on your credit report for up to 10 years. However, while the bankruptcy itself will remain on your credit report, after filing for bankruptcy, you might be seen as less of a credit risk than before filing since you have fewer outstanding debts.

Rebuilding credit after Chapter 13 takes longer, typically three to five years, as you follow a strict repayment plan. Regular, timely payments and responsible financial behavior can help improve your score during this period.

Some people might find that their credit scores rise after their bankruptcy is discharged. The good news is after bankruptcy or foreclosure, you can immediately take steps that can have a positive impact on your credit history: Pull a copy of your credit reports and VantageScore credit score.

The discharge releases the debtor from all debts provided for by the plan or disallowed (under section 502), with limited exceptions. Creditors provided for in full or in part under the chapter 13 plan may no longer initiate or continue any legal or other action against the debtor to collect the discharged obligations.

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.

You don't need to take action to remove a bankruptcy from your credit report since it will automatically be deleted seven or 10 years from the filing date, depending on the type of bankruptcy.

Making timely payments on your Chapter 13 repayment plan is crucial. This is a significant factor in determining your credit score, as it demonstrates your reliability to potential creditors. Maintaining low balances on revolving accounts, such as credit cards, is essential for rebuilding your credit score.

A bankruptcy expires, or "falls off" your credit report after 10 years if you file for Chapter 7 bankruptcy, or after seven years if you file Chapter 13 bankruptcy.

How do I know when my Chapter 13 is over? ›

You'll receive the final decree once the court is ready to close the case. In Chapter 13, you'll receive a debt discharge after completing your three- or five-year repayment plan. The court will close the case by mailing a "final decree" after the trustee submits a final payment distribution report.

How soon after bankruptcy can I get a loan? No law prevents you from applying for a loan after bankruptcy, but you do have to wait until all your debts are discharged, which can take several months with Chapter 7 or up to five years with Chapter 13.

The truth is that bankruptcy can definitely tank people's credit scores. But in most cases, these people already have a bad credit score because of how much debt they have. In fact, the average credit score after a bankruptcy discharge can vary between 400 and 530.

How to Remove Canceled Debt From Your Credit Report. In general, you can't get discharged debt removed from your credit report unless the information is inaccurate. In that case, you have the right to file a dispute with the credit reporting agencies.

In most cases, hard inquiries have very little if any impact on your credit scores—and they have no effect after one year from the date the inquiry was made. So when a hard inquiry is removed from your credit reports, your scores may not improve much—or see any movement at all.

The good news is that a dismissed bankruptcy will not stay on your credit report forever. It will remain there for seven to ten years, but then it should be removed from your credit history.

Your payment history is the most influential factor in determining your FICO^® Score^☉ , and bankruptcy one of the worst things that can happen to your credit. Depending on your situation, a bankruptcy record can knock up to 200 points off your credit score.