A lot can happen in ten years. A lot. For instance? Well, this article is being written in 2019. Here’s just a quick snapshot of some of the notable events that happened 10 years ago, in the far off days of 2009:

We could go on and on and on. You probably have news stories that stick out to you, or personal memories from that year that you can recall in a snap.

Or maybe? Your memories of what happened a full decade ago are a bit fuzzy. Maybe the things that seemed so pressing and enormous at the time haven’t had the long-tail lasting impact you may have thought (just ask the World Series-winning Chicago Cubs, if you need living proof).

The same goes for the effects of bankruptcy. In the moment, filing for bankruptcy can feel like an enormous undertaking, which will impact your financial well-being forever. But in reality, many consumers find themselves able to move on and reestablish their financial health quickly after the close of their bankruptcy proceedings. And within ten years? Well, sometimes, consumers find that severe debt – and its most acute effects – ultimately feel like a distant memory.

When we talk about bankruptcy, many of the FAQs we get all the time have to do with the aftereffects of the bankruptcy process. One such common question goes along the lines of:

“How long does a bankruptcy stay on my credit report? Will it affect my credit score for the rest of my life?”

One of the biggest myths out there about bankruptcy – and there are quite a few – is that consumers will be negatively affected by filing for decades down the line. The fact of the matter? Bankruptcy is, ultimately, intended to help debtors regain their financial footing and become contributing members of the economy once again. It’s about providing a path forward – not intentionally holding debtors back.

With this in mind, let’s dive into some of the biggest questions about bankruptcy and credit:

How Long Does Bankruptcy Remain on a Credit Report?

The rule of thumb for determining how long a bankruptcy remains on your credit report comes down to which type of consumer bankruptcy you filed – Chapter 7 or Chapter 13.

  • Chapter 7: The bankruptcy mark will remain on your credit reports for ten years, after which it will drop off. Accounts and debts included in your bankruptcy could fall off your report sooner.
  • Chapter 13: Bankruptcy will be noted on your credit report for seven years. Accounts may fall off your reports sooner. Many creditors and lenders also grant more leniency for Chapter 13 filers, because this process generally does involve making significant repayments to your previous creditors over the span of three to five years.

These timelines are standard. With that said, however, many consumers may ultimately find that they stop feeling the negative aftereffects of bankruptcy well before this seven or ten year reporting period is up – provided that they take steps to begin repairing their credit and establish good financial habits (more on that below).

How Long Does Bankruptcy Affect a Credit Score?

While your bankruptcy will be reported on your credit reports for a set number of years, there is no hard and fast rule for how long a debtor may feel the impact of their bankruptcy on their credit score. Ultimately, credit scores are determined by the information included on a consumer’s credit report. But, with that said, many, many people ultimately find that their score is able to recover long before the reporting period for their bankruptcy expires – and perhaps much sooner than they may have thought possible.

Many consumers find that the effect of their bankruptcy on their credit score fades over time.  In fact, a recent report from The Street suggests that a remarkable 40% of Americans are able to reach a credit score over 640 just one year after filing for bankruptcy, and 65% of bankrupt Americans see the same score (or higher) within three years after a bankruptcy.

Remember, too, that debtors will be affected by bankruptcy in different ways. Your personal circumstances will play a large role in determining how much your credit score is impacted by your bankruptcy. For instance, a common rule of thumb is that debtors with healthier credit before bankruptcy may see a more significant drop in their score than those with poorer credit.

What Can Consumers Do to Improve Their Credit After Bankruptcy?

Again, it’s important to keep in mind that no two people – and no two credit scores – are going to be impacted by bankruptcy in exactly the same way. There are many paths one can take to move on after bankruptcy, depending on your unique personal circumstances, your financial picture, and, importantly, your goals for the future.

With that said, there are a few “tried and true” guidelines and goalposts that consumer protection experts tend to recommend for those looking to move forward post-bankruptcy , including creating realistic financial goals for the future, setting a budget and keeping up with ongoing payments, focusing on building savings, avoiding substantial new debts, and taking reasonable, practical steps to build new credit – such as accepting a low credit limit, using a “secured” credit line, or rebuilding credit with the help of a co-signer.

Have Any Further Questions About Any Aspect of Bankruptcy?

Bankruptcy is a practical solution for individuals, couples, business owners, and retirees to get  the financial relief and reset they need, in order to get their credit and their lives back on track.

With that said, though, it’s important to realize that this process can be complex and emotionally trying – and that what comes immediately after bankruptcy can have a huge and lasting impact on your financial future.

Many consumers will find that this process is made easier – and, ultimately, more helpful in the long term – with the assistance of an experienced legal professional, who can provide guidance, insight, and tailored solutions at every step of the way.

At Gunderson Law Firm, we strive to protect our clients’ assets to the full extent allowed by today’s laws throughout the complex bankruptcy process, helping them get the debt relief they not only need, but genuinely deserve.

Moving through the bankruptcy process, we can also counsel you on realistic ways to avoid serious debt issues in the future. Our hope is that we can address your specific situation with strategic plans to help put severe indebtedness behind you, so you can enjoy life again.

Interested in learning more about any aspect of bankruptcy in Illinois? Curious about finding the solutions that may work for you? Don’t hesitate to drop us a line or give us a call to get the conversation started.