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How Long Does Bankruptcy Appear on a Credit Report?

Steven C. Frazier, Attorney At Law Nov. 22, 2023

Young Person Calculating Credit Card Expenses at HomeLife is full of challenges, and certainly one of them is financial. You never know when an emergency is going to strike, whether it be medical, auto- or home-related, or just a period of unemployment.  

In any of these situations, you may have to run up your credit cards and take out personal loans just to get by. Sometimes, your financial affairs can get so out of hand that you have to juggle payments—making the minimum on one account, and perhaps alternating between paying others. Soon, your phone is ringing off the hook with creditors and bill collectors demanding payment. 

What to do? Though no one likes the sound of the word, bankruptcy is a perfectly legitimate means to eliminate unsecured debt obligations and get a fresh start in life. Of course, it is not without its consequences, one of which can be your creditworthiness. Look at it this way, however: When you’re skipping payments or just being drowned in debt, your credit score is going to tank anyway. Bankruptcy can actually help restore your rating. 

If you’re being overwhelmed by debt in or around Kingsport, Tennessee, contact me, Steven C. Frazier, Attorney at Law. I am a bankruptcy attorney who will help you navigate the system and take advantage of all the exemptions allowed so that you can retain possession of the essentials you need to maintain your lifestyle in the best way possible. I also proudly serve clients in Church Hill, Johnson City, Bristol, and anywhere else in Northeastern Tennessee. 

Bankruptcy Options: Chapter 7 

Chapter 7 of the bankruptcy code is known as the liquidation option. This can sound fairly frightening, as if the state is going to swoop in and take everything you have to pay creditors. Not true.  

Tennessee allows for exemptions for your home, auto, and other personal possessions up to certain equity limitations. In addition, your retirement savings, including 401(K)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and traditional and Roth IRAs, are protected up to $1,512,350 per person. 

Bankruptcy Options: Chapter 13 

Chapter 13 of the federal bankruptcy code is known as the “wage-earner’s plan.” This is because it allows the petitioner to use “disposable income”—what’s left after paying for the essentials of life—to pay creditors over a three- to five-year period. After that period is over, whatever is left on the debt obligations is forgiven. 

The other beautiful part of Chapter 13 is that it allows you to include in the reorganization plan you submit any back-due payments on secured loans for homes and cars and other real property. This allows you to resume your normal monthly payments and retain your home and car.  

Also, with the automatic stay provided in any bankruptcy filing (creditors are barred from contacting you or trying to collect), you can have time to work out a loan modification. However, secured creditors can petition for the stay to be lifted, so you have to act quickly. 

How Much Does Bankruptcy Affect My Credit Score? 

As mentioned earlier, if you’re missing payments and way over your head in debt, your score is already going to be affected negatively. If you complete your Chapter 7 or Chapter 13 filing, your unsecured debts will be wiped out, which actually can improve your score.  

However, your bankruptcy filing will stay on your credit report for years afterward—seven years for a Chapter 13 filing and 10 years for a Chapter 7 filing. The first two years following bankruptcy generally have the most noticeable effect on your creditworthiness. After that, your financial future will generally brighten. 

Building Your Credit After Bankruptcy 

Two of the more established methods of regaining a solid credit rating are through a credit-builder loan and through a secured credit card. Credit unions often offer credit-builder loans. You can, for instance, borrow $1,000 with a fixed payment period of six months to two years. Once you’ve paid off the loan, the money is yours, and your credit score will reflect your efforts. 

A secured credit card works by depositing money into a credit card account, which then becomes your borrowing limit. As you borrow and make payments on time—and hopefully in full—your credit score will improve. 

Be aware, however, that once you file for bankruptcy, and even before you’re been discharged, credit card companies and even auto loan companies will make you offers, but pay attention to the details. Most are at high-interest rate offers with annual fees for credit cards and onerous penalties for missed or late payments. 

Rely on Knowledgeable Legal Advice 

If debts are overwhelming you in or around Kingsport, Tennessee, or anywhere in Northeastern Tennessee, contact me, Steven C. Frazier, Attorney at Law. I can help you choose the right path in bankruptcy to give you the fresh financial start in life that you deserve, including rebuilding your credit.