There are many reasons that people may delay filing for bankruptcy despite struggling financially. Frequently, concerns about long-term consequences deter those dealing with high levels of debt.
People who want to pursue better jobs may recognize that employers are likely to perform credit checks during the hiring process. Those intending to obtain a mortgage or purchase a vehicle may worry that bankruptcy could prevent them from qualifying for loans.
Bankruptcy does have a strong negative impact on a filer’s credit score and financial opportunities. Thankfully, that impact is temporary.
When does bankruptcy come off a credit report?
Federal rules limit how long the credit bureaus can report different issues. Most standard problems, including missed payments, can only appear on a credit report for up to seven years. In some cases, the credit bureaus can report more serious issues for longer.
The limits for reporting a bankruptcy discharge depend in part on the type of bankruptcy pursued. In a Chapter 7 bankruptcy case, the credit bureaus can provide inquiring parties with information about a discharge for 10 years after the discharge date.
Those who pursue Chapter 13 bankruptcy spend multiple years making payments on their debts. The credit bureaus then only report their discharge for 7 years after the end of the bankruptcy. A bankruptcy discharge does limit credit opportunities, but its impact decreases as the filer develops a history of responsible credit use post-bankruptcy.
Learning about the rules for bankruptcy can help people understand when to file and what consequences they face. A record of a bankruptcy only temporarily affects an individual’s credit report.