Before you file for bankruptcy in Arizona, it’s important to understand the potential long-term consequences it may have on your finances. On the one hand, bankruptcy may be the fresh start you’ve been looking for, helping you to discharge outstanding debts or save your home from foreclosure.
On the other hand, though, there are some downsides to filing for bankruptcy, including the fact that a bankruptcy can show up on a credit report from seven to ten years after you complete the filing process. Find out how long you can expect to see bankruptcy on your credit report and learn the ins and outs of bankruptcy in Arizona with this guide from Lerner and Rowe Law Group.
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The Effects of Chapter 7 Bankruptcy on Your Credit Report
How long bankruptcy stays on your credit report is dependent on which type of bankruptcy you complete. A Chapter 7 bankruptcy (also referred to as a liquidation bankruptcy), will show up on a credit report for ten years after you file. While a decade certainly feels like a long time, it’s worth noting that the impact a bankruptcy has on your credit report will diminish over time.
Your credit score will probably take a significant hit after you first file for Chapter 7—dropping anywhere from 130 to 240 points, depending on what your score was to start with—but with time, patience, and good credit-building habits, you can begin to repair your credit score and improve your credit report within a matter of a few years.
In addition, bankruptcy isn’t the only thing that can stay on your credit report for a long time. Late payments, foreclosures, repossessions, and collections will all stay on your credit report for seven years. Like bankruptcy, their impact will diminish over time, but you won’t necessarily get the same fresh start that you do with a Chapter 7 discharge.
The Effects of Chapter 13 Bankruptcy on Your Credit Report
Filing for Chapter 7 bankruptcy is ideal for those who have a lot of unsecured debt and few assets. Chapter 13 bankruptcy, on the other hand, may be more suited for those who have the means to catch up on late and missed payments via a restructured payment plan. Chapter 13 can also allow you to keep your car, home, and other assets you may have.
At the end of your three to five year Chapter 13 repayment plan, some remaining debts (such as medical debt) can be discharged if you’ve successfully made all your payments and complied with all requirements under your Chapter 13 plan. A Chapter 13 bankruptcy will show up on your credit report for seven years.
In addition to staying on your credit for a shorter period of time, creditors also tend to show more leniency towards Chapter 13 bankruptcies versus Chapter 7, since you are making an attempt to pay back some of your debts. This can result in less of a hit to your credit score than Chapter 7, but you should still be prepared for your credit rating to go down—and you should still make a plan to rebuild your credit after the fact.
How to Repair Your Credit After Bankruptcy
Having a bankruptcy on your credit report doesn’t have to ruin your life. It may take between seven to ten years for a bankruptcy to drop off your credit report, but you can begin rebuilding your credit much sooner than that. Here are a few quick tips you can use to strengthen your creditworthiness after filing for bankruptcy:
- Monitor your credit carefully. You should always keep an eye on your credit score, but it’s especially important after you’ve filed for bankruptcy. Errors do sometimes happen, and catching them early can save you a lot of trouble. Be on the lookout for accounts not part of your bankruptcy filing that may be incorrectly reported with a bankruptcy status, and make sure that your bankruptcy is removed from your credit report as soon as it’s eligible.
- Get a secured credit card. Most credit cards are unsecured, and qualifying for a traditional credit card may be difficult after a bankruptcy. However, applying for a secured credit card can be a great way to start rebuilding your credit. The credit card is secured by a deposit you make with the creditor—if you stop making payments, they keep the deposit. Be sure to get a secured credit card that will report to credit bureaus so you can reap the benefits of using your credit responsibly.
- Stay on top of payments and bills. Easier said than done, of course, but the most important thing you can do after a bankruptcy is to prioritize paying your bills and any debt payments. When you pay on time, you avoid late fees and collections, which can ultimately damage your credit and compound your debt over time.
Get the Facts About Filing for Bankruptcy in Arizona
Bankruptcy is a big financial decision, one you shouldn’t make lightly. Before you choose bankruptcy or another type of debt consolidation, consider having your finances reviewed by a professional. At Lerner and Rowe Law Group, we offer free initial consultations to anyone who’s considering filing for Chapter 7 or Chapter 13 bankruptcy. Let our experienced Arizona bankruptcy lawyers review your case at no charge and with no obligation to retain our services.
To schedule your free consultation, call us at 602-667-7777 (Phoenix) or 520-620-6200 (Tucson). Representatives are also standing by to help you and answer your questions via LiveChat. Alternatively, you can request your complimentary case review by simply filling out this form.