When people are pondering bankruptcy, there are many questions. How will it affect my credit? How will it affect my debts? The list goes on and on.
One question that many forget until after the process is over is “How long does bankruptcy stay on my credit report?”
This can often be a forgotten question because, once bankruptcy is part of the equation, one’s credit is usually already negatively affected by debt. And, the answer can largely depend on the type of bankruptcy.
Types of consumer bankruptcy
There are two types of bankruptcy used by California residents (non-businesses): Chapter 7 and Chapter 13 bankruptcy.
Chapter 7 is often referred to as liquidation bankruptcy because your non-exempt assets are sold (liquidated) to pay off your debts. For most filers, though, most assets are exempt, which means that debts are discharged (forgiven) without actually selling a large number of assets.
Those with a higher income or a larger number of assets will likely not qualify for Chapter 7 bankruptcy. Instead, they may use Chapter 13 bankruptcy.
In a Chapter 13 bankruptcy, the trustee, in conjunction with you, your attorney and your creditors create a debt repayment plan to pay off some or all of your debts over a period of three to five years. At that point, whatever is left is discharged.
How long does bankruptcy stay on my credit report?
How long items stay on your credit report is regulated by the Fair Credit Reporting Act. The Act regulates how all credit reporting agencies report and collect information. Chapter 7 bankruptcy will stay on your credit report for 10 years from the date you file bankruptcy.
It can fall off prior to the 10-year mark at the discretion of the credit reporting agency. Chapter 13 bankruptcy can have a shorter shelf life of seven years.