Average Credit Score After Chapter 13 Discharge
Your credit score after a Chapter 13 Bankruptcy discharge will vary. Your new score will depend on how good or bad your credit score was prior to the filing of the Chapter 13 Bankruptcy. For most individuals, you can expect to see quite a dip in your overall credit score. This is a common result, when you have any type of bankruptcy attached to your credit report. Its best to proactively address the issues which first caused the Chapter 13 Bankruptcy. Then take the proper steps to ensure it doesnt occur again.
How Long Does Information Stay On My Equifax Credit Report
The length of time information remains on your Equifax credit report is shown below: Active credit accounts that are paid as agreed remain on your Equifax credit report as long as the account is open and the lender is reporting it. Closed accounts reported by the lender as paid as agreed can stay on your Equifax credit report for up to 10 years from the date it was reported by the lender to Equifax. Accounts not paid as agreed can remain on your Equifax credit report for up to 7 years. Late Payments Remain on your Equifax credit report for up to 7 years from the original delinquency date the date of the missed payment. The late payment remains even if you pay the past-due balance. Collection Accounts Remain on your Equifax credit report for up to 7 years from the date of the first missed payment. The account remains on your Equifax credit report even if you pay the collection account. Bankruptcy
- Chapter 7 or 11 filed and discharged status bankruptcies remain for 10 years from the date filed
- Chapter 12 and 13 bankruptcies remain for 7 years from the date filed
- Dismissed bankruptcies remain for 7 years from the date filed
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Learn How To Rebuild Credit After Chapter 13 Bankruptcy
Updated By Cara O’Neill, Attorney
Filing for Chapter 13 bankruptcy allows debtors to catch up on delinquent accountssuch as their mortgage, car loans, or back taxesand to keep property they would otherwise lose in foreclosure or repossession. After completing Chapter 13 bankruptcy, debtors emerge with their accounts current and property intact. Despite its benefits, Chapter 13 bankruptcy can harm a filer’s credit. However, you can take steps to rebuild your credit.
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Getting New Credit After Bankruptcy
Assuming that you successfully complete a repayment plan under Chapter 13, you will get a discharge that will show that debts covered by the bankruptcy have been removed. You should be able to get new credit at this point, although you should make sure to keep up with payments and avoid accumulating too much debt too fast. Lenders may charge more interest when you have a Chapter 13 bankruptcy on your record, but interest rates will go down as you show that you can handle the debt responsibly. Over time, your credit score will improve as well.
After you complete your bankruptcy, you should get copies of your credit report from each of the major bureaus. This will allow you to verify that the record reflects a discharge rather than a dismissal of your bankruptcy. Also, you should make sure that all of the debts that were included in the Chapter 13 proceeding are marked as having been included. Any errors or omissions may cause a lender to incorrectly conclude that you have not paid off the debt.
A Chapter 13 bankruptcy case will appear on your credit report for seven years after you file. Since the case lasts for three to five years, it will appear for two to four years after the discharge. By contrast, a Chapter 7 bankruptcy case will appear for 10 years. This is a potential reason to choose Chapter 13 over Chapter 7.
How Chapter 13 Works
A chapter 13 case begins by filing a petition with the bankruptcy court serving the area where the debtor has a domicile or residence. Unless the court orders otherwise, the debtor must also file with the court: schedules of assets and liabilities a schedule of current income and expenditures a schedule of executory contracts and unexpired leases and a statement of financial affairs. Fed. R. Bankr. P. 1007. The debtor must also file a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling evidence of payment from employers, if any, received 60 days before filing a statement of monthly net income and any anticipated increase in income or expenses after filing and a record of any interest the debtor has in federal or state qualified education or tuition accounts. 11 U.S.C. § 521. The debtor must provide the chapter 13 case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case . Id. A husband and wife may file a joint petition or individual petitions. 11 U.S.C. § 302.
In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must compile the following information:
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The Chapter 13 Discharge
The bankruptcy law regarding the scope of the chapter 13 discharge is complex and has recently undergone major changes. Therefore, debtors should consult competent legal counsel prior to filing regarding the scope of the chapter 13 discharge.
A chapter 13 debtor is entitled to a discharge upon completion of all payments under the chapter 13 plan so long as the debtor: certifies that all domestic support obligations that came due prior to making such certification have been paid has not received a discharge in a prior case filed within a certain time frame and has completed an approved course in financial management . 11 U.S.C. § 1328. The court will not enter the discharge, however, until it determines, after notice and a hearing, that there is no reason to believe there is any pending proceeding that might give rise to a limitation on the debtor’s homestead exemption. 11 U.S.C. § 1328.
The discharge releases the debtor from all debts provided for by the plan or disallowed , 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 Fair Credit Reporting Act
The Fair Credit Reporting Act regulates what credit bureaus can and cannot do when it comes to credit reports, and can help answer the question of how long does bankruptcy stay on your credit report.
15 U.S.C. § 1681c states that no consumer reporting agency may make any consumer report containing any of the following items of information Cases under title 11 or under the Bankruptcy Act that, from the date of entry of the order for relief or the date of adjudication, as the case may be, antedate the report by more than 10 years.
This means that a bankruptcy cannot appear on a credit report from more than 10 years from the date of the order for relief of bankruptcy, which is usually the bankruptcy filing date. The credit bureaus are required to correct information that is inaccurate, so keeping an eye on your credit report after you declare bankruptcy can help ensure that the information is reported correctly.
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Contact A Chapter 13 Bankruptcy Lawyer In Indiana
Bankruptcy attorneys can help you through the process of declaring chapter 13 bankruptcy. Filing can often become overwhelming and hiring an experienced bankruptcy attorney will help make the process easier and less confusing.
If you are an Indiana resident looking for experienced bankruptcy lawyers in Indiana, contact the law office of Sawin & Shea, LLC. Our lawyers have years of experience assisting Indiana residents through the bankruptcy process. You can call our office at 317-759-1483, or you can schedule a free consultation by clicking here.
Bottom Line: Bankruptcy And Credit
I have personally seen the impact of the bankruptcy petition on some debtors five to seven years later and most are doing fine, says Arnold Hernandez, an attorney in Tustin, Calif., who handles bankruptcy cases. Bankruptcy is not forever.
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Is It True That After 6 Years Your Credit Is Clear
Defaults remain on your credit file for six years before you have to pay them off. Whether or not you pay off the debt, a default will remain on your credit report for that long. However, the good news is that once your default has been removed, the lender wont be able to reactivate your account, nor will they be able to charge you interest.
What Bankruptcy Will Affect While On Your Credit Score
Your payment history, on-time payments, and recent credit reporting can all affect how lenders work with you.
Once you file bankruptcy and businesses see your credit report’s negative information, you may have concerns about:
- Getting a car loan
- Getting loans without a qualified co-signer
- Adding authorized users to some credit cards
- Security deposits and returns of safety deposits
You have options regarding all these concerns if you are having credit or debt issues. There are ways to address each concern by yourself or with professional help. Getting a fresh start is possible, especially after filing bankruptcy.
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When Is Chapter 7 Bankruptcy Removed From Your Credit Report
Chapter 7 bankruptcy is the most common and simplest type of bankruptcy protection for individuals. It is often referred to as liquidation bankruptcy, which means that assets are often sold to pay secured debt to creditors. Chapter 7 is also sometimes used by small businesses. After liquidating assets to pay secured debt, most or all of your unsecured debt is discharged. This includes credit cards, personal loans, department store credit, and other similar debt. Student loans, alimony and child support typically cannot be eliminated through bankruptcy.
Typically, a Chapter 7 bankruptcy can be completed within a few months. After your bankruptcy hearing, the Chapter 7 is then discharged. This bankruptcy will stay on your credit record up to 10 years from the date of bankruptcy filing.
How Will Bankruptcy Effect My Credit Score
It is difficult to say with certainty how bankruptcy affects credit scores because credit scores are based on a multitude of factors. One of the factors that determine the credit score is the amount of debt a person has. Bankruptcy can assist with this factor by discharging debt a borrower may otherwise be obligated to pay. Another factor is open credit accounts with late payments, these accounts can significantly reduce your credit score. Fortunately, bankruptcy can assist with this aspect as well. If the debt is discharged in bankruptcy the account should no longer be reported as an open delinquent account.
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Bankruptcy Isnt A Death Sentence
So how long does Chapter 7 bankruptcy stay on your credit report?
It can stay as long as 10 years, but that doesnt mean youre stuck with poor credit that long. If you stick to your payment plan, get a secured credit card and make all payments on time, you can improve your credit score before the bankruptcy record is gone.
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How Long Do I Have To Wait To Get Good Credit After Filing Bankruptcy
As discussed above, most consumers filing for bankruptcy, will find that their credit scores may be in the 600s immediately after receiving a bankruptcy discharge. After a bankruptcy filing you can start rebuilding your credit by using secured credit scores, being added as an authorized user to somebody elses credit or obtaining an auto loan after filing bankruptcy. It is not uncommon that within a year or 2 you could find yourself with a 700-800 credit score if you actively work on your credit and pay your debt on time moving forward. It is a myth that your credit will be ruined forever if you file for bankruptcy and in fact you dont have to wait the 7-10 years for the bankruptcy to fall off your credit report either. if you are in an active chapter 13 bankruptcy, you would need to wait until after you get your bankruptcy discharge and complete your plan as you are not allowed to incur new debt while in a chapter 13 plan without court or chapter 13 trustee permission.
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Consider Applying For A Secured Credit Card
After filing for bankruptcy, its unlikely that you will qualify for a traditional credit card. However, you may qualify for a secured credit card. A secured credit card is a credit card that requires a security depositthis deposit establishes your credit limit.
As you repay your balance, the credit card issuer usually reports your payments to the three credit bureaus. Repaying your balance on time can help you build credit. Once you cancel the card, a credit card provider typically issues you a refund for your deposit.
When shopping for secured credit cards, compare annual fees, minimum deposit amounts and interest rates to secure the best deal.
If They Dont Remove The Bankruptcy What Do I Need To Provide To Have It Removed
Unfortunately, credit bureaus do make mistakes, but the most common errors usually relate to identity or credit accounts .
If theres a bankruptcy on your report that should have been purged already, you have a right to get the information removed by filing a dispute. You can file a dispute if you find other errors, too.
Each credit bureau has a similar but slightly unique process for filing a dispute. Generally, the process involves visiting the credit bureaus website and answering a few questions to confirm your identity, and then telling them which information you wish to dispute.
If you find an error, be sure to look on the report for instructions on how to contact the credit bureau. You can also find each credit bureaus dispute information here:
If you struggle with getting your information updated or need help with the dispute, there are options you can explore for expert assistance so you dont have to go at it alone.
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Can Claiming Bankruptcy Help Improve My Score
Bankruptcy is a very effective way to reduce or eliminate many debts. Bankruptcy will never create an immediate improvement in your credit score.
If you are deeply in debt, continuing to fall behind on payments, or your accounts are in collection, bankruptcy may help you recover more quickly compared to other kinds of debt management strategies. Bankruptcy discharges many types of debt resulting in a fresh start.
When debt is reduced and you are able to control your finances and begin making on-time loan and credit payments, you can start rebuilding your good credit.
Bankruptcy gives you a chance to break the recurring cycle of debt. Unfortunately, if you continue to default on loans, and make late payments this will result in late fees, more accumulated interest and an increase in your overall debt. If you remain trapped in this cycle, you wont have the chance to improve your credit score.
Is Filing Bankruptcy Worth It?
The trade-off for bankruptcy is a lasting blemish on your credit report in return for immediate relief from most debt, and the opportunity to improve your financial situation through responsible actions.
In some cases, living with mounting debt, repossessions, harassment from collection agencies, and even lawsuits, can be more difficult and complicated to explain to a future creditor than bankruptcy.
How To Rebuild Credit After Bankruptcy
Accounts included in a bankruptcy filing wont be reported as unpaid or past due anymore on your credit reports. Assuming you pay new debts on time as you incur them, your credit rating will start to recover.
In the meantime, review your credit reports. Accounts that were discharged as part of your bankruptcy filing should be reported as discharged or included in bankruptcy on your credit reports. They should not show any money owed on them a balance of $0.
If there are errors in a credit report, contact the credit bureau to have the report corrected.
You can also start to rebuild your credit standing by obtaining a new credit card. You may have to resort to obtaining a secured credit card, which requires a deposit with the creditor. A third option is to have a family member or friend who has a good credit history apply for a card with you as a co-signer.
Rebuilding your credit is a gradual process. As you use a credit card and pay on time each month, other creditors will see your good financial habits on your credit report when its time to seek additional credit. It is best to avoid carrying a balance. If you must, it should not exceed 30% of the entire line of credit. You may review some tips to improve your credit score.
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Does Bankruptcy Wipe Your Credit Report Clean
Myth: All bankruptcy debts will be wiped clean from your credit report.
The truth: While bankruptcy may help you erase or pay off past debts, those accounts will not disappear from your credit report. All bankruptcy-related accounts will remain on your credit report and affect your credit score for up to seven years or as long as they normally would, though their impact will diminish over time.