When you file for bankruptcy, the court gives you an automatic stay. You don’t have to worry about collection activity, at least for the immediate future. The courts will dismiss pending lawsuits, and you can tell collection agencies that call you that you have filed for bankruptcy.
Your lenders will freeze your lines of credit, and your credit score will drop – possibly by well over a hundred points. For years after the discharge of your bankruptcy, the record of your filing will limit your credit options.
When does the bankruptcy come off of your credit report?
Both kinds of bankruptcy usually have a ten-year impact
There are different credit reporting regulations for the two most common forms of consumer bankruptcy. In a Chapter 7 bankruptcy, where you do not repay your creditors but instead have to sell some of your property that you cannot exempt, the discharge will stay on your credit report for ten years.
In a Chapter 13 bankruptcy, where you make three years or more of payments to your creditors through the courts, the discharge will only stay on your report for seven years. However, when combined with the three years of payments, the bankruptcy will affect your credit report for at least ten years overall, much like a Chapter 7 filing.
During that time after your discharge, you can slowly build a history of on-time payments so that your credit score is ultimately higher than it was before you filed. Most people can start receiving credit offers within a few months or a few years of their discharge, and they will be eligible for the same credit as most other people once the bankruptcy comes off their credit report.
Learning more about the laws that govern personal bankruptcy can help you weigh the benefits of the options available.