What Does Filing Bankruptcy Do to Your Credit Score

Title: What Does Filing Bankruptcy Do to Your Credit Score?


Filing for bankruptcy is a difficult decision that many individuals face when overwhelmed by their financial obligations. While it can provide relief from debt and a fresh start, it also has a significant impact on one’s credit score. Understanding what filing bankruptcy does to your credit score is crucial for those considering this option. In this article, we will delve into the effects of bankruptcy on credit scores, debunk common misconceptions, and address frequently asked questions surrounding this topic.

Effects of Bankruptcy on Credit Scores:

1. Immediate Credit Score Drop:
Filing bankruptcy will result in an immediate decrease in your credit score. The exact decline depends on several factors, such as your previous credit score and the type of bankruptcy you file. Chapter 7 bankruptcy typically has a more severe impact than Chapter 13 bankruptcy.

2. Bankruptcy Record on Credit Report:
A bankruptcy record will remain on your credit report for a specified period. In the case of Chapter 7 bankruptcy, it can stay on your report for up to ten years, while Chapter 13 bankruptcy can stay for up to seven years. This record serves as a red flag to potential lenders, making it more difficult to obtain credit in the future.

3. Limited Access to Credit:
After filing for bankruptcy, it becomes challenging to obtain credit. Lenders may view you as a higher risk borrower due to your past financial difficulties. If you do manage to secure credit, it will likely come with higher interest rates and stricter terms.

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4. Rebuilding Credit:
Despite the initial negative impact, it is possible to rebuild your credit score after bankruptcy. Taking steps such as making timely payments, applying for secured credit cards, and seeking credit counseling can help demonstrate responsible financial behavior. Over time, your credit score can gradually improve.

Common Misconceptions about Bankruptcy and Credit Scores:

1. Bankruptcy erases your credit history:
Contrary to popular belief, bankruptcy does not erase your credit history. It is important to understand that credit reports are a record of your financial activities, and bankruptcy is a significant event that will be reflected in your report for a considerable time.

2. Bankruptcy guarantees a low credit score forever:
While bankruptcy does have a long-lasting impact on your credit score, it does not condemn you to a low score indefinitely. By adopting responsible financial habits and rebuilding credit over time, it is possible to improve your credit score.

3. Bankruptcy affects all types of credit equally:
Different types of credit are impacted differently by bankruptcy. Unsecured debts, such as credit cards and personal loans, are typically more affected compared to secured debts like mortgages or car loans. Secured debts may still be available, albeit with stricter terms.


Q1. Will bankruptcy completely ruin my credit score?
A: While bankruptcy will have a significant impact on your credit score, it does not mean your score will be permanently ruined. With time and responsible financial behavior, you can gradually improve your credit score.

Q2. Can I obtain credit after bankruptcy?
A: Yes, it is possible to obtain credit after bankruptcy. However, it may be more challenging and come with higher interest rates and stricter terms. Secured credit cards or credit counseling can help in rebuilding credit.

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Q3. How long will bankruptcy stay on my credit report?
A: The duration of bankruptcy on your credit report varies. Chapter 7 bankruptcy can remain for up to ten years, while Chapter 13 bankruptcy can stay for up to seven years.

Q4. Can I file bankruptcy multiple times?
A: Yes, it is possible to file bankruptcy more than once. However, there are specific time limits and restrictions in place, such as the number of years that must elapse between filings.


Filing for bankruptcy undoubtedly has a significant impact on your credit score. It leads to an immediate drop in your score and leaves a noticeable mark on your credit report for several years. However, it is important to remember that bankruptcy is not a permanent sentence to a low credit score. By adopting responsible financial habits and taking steps towards rebuilding credit, individuals can gradually improve their creditworthiness. It is vital to educate yourself about bankruptcy and consult with professionals before making any decisions that can impact your financial future.