How Long Does Bankruptcy Stay on Your Credit Report?

For many people struggling with debt, bankruptcy is considered a last resort – but it doesn’t have to be the last stop in someone’s financial history. Over 1 million bankruptcies were filed or pending between June 30, 2021 and June 30, 2022,¹ so bankruptcies are not as rare as they may seem.

Unfortunately, that doesn’t make recovering from them any easier. Bankruptcies stay on a person’s credit report for seven to 10 years, depending on the type of filing, potentially holding down their credit score all that time. But it’s important to remember that credit scores are based on a timeline of events, and individuals can take steps to rebuild their credit even before that bankruptcy gets erased. Knowing what to expect before filing can help people choose the right type of bankruptcy to file for, and to prepare for its impact.

The most common forms of personal bankruptcy found on a credit report are chapter 7, chapter 13, and dismissed bankruptcies. Each has its own rules and requirements.

• Chapter 7 bankruptcy: Accounting for 63.1% of nonbusiness bankruptcies between June 30, 2021 and June 30, 2022,² chapter 7 is the most common type of personal bankruptcy. Chapter 7 is an option primarily for individuals with monthly income below their state’s current median or those who can prove that they don’t have enough disposable income to pay their debts, passing what is commonly known as a “means test.” After filing chapter 7 bankruptcy, an individual is usually no longer be liable for large portions of their debt, which is considered “discharged.”³

• Chapter 13 bankruptcy: During that same 2021-2022 period, chapter 13 filings made up 36.8% of nonbusiness bankruptcies.⁴ Chapter 13 can be used by individuals with regular income, who, as of April 2022, have unsecured debt below $465,275 or secured debt below $1,395,875.⁵ Instead of discharging debt, chapter 13 reorganizes it. After filing, debtors are given a three- to five-year repayment plan for at least some of their debt. Chapter 13 lets debtors avoid liquidation of specific assets that aren’t always protected during chapter 7, such as their homes.⁶

• Dismissed bankruptcy: When a chapter 7 or 13 bankruptcy case is dismissed, whether due to a violation of the bankruptcy agreement’s terms, fraud, or a request by the bankruptcy filer, the filer is once again liable for their original debt. The debt is restored and collections resume. Even though the bankruptcy is no longer active, it still appears on the filer’s credit report and can have the same impact on their credit score as a “regular” bankruptcy. That’s one reason why it’s important to meet the terms of a bankruptcy. Otherwise, debtors can be stuck with the credit impact of a bankruptcy and their original debt, plus possible interest and penalties.

It’s important to note that dismissal is very different from discharge. In a discharge, the bankruptcy plan has been completed and creditors cannot pursue further collection. But not all debt can be discharged in a bankruptcy – for example, some student loans, tax debts, and child support usually remain intact – so it’s best to speak with a legal or debt counselor regarding your specific situation before pursuing bankruptcy.

Note that chapter 11 bankruptcy is also a possibility, but it’s far more common among businesses. During that same 2021-2022 period, chapter 11 filings made up only 0.1% of all nonbusiness bankruptcies, compared to 31% of all business bankruptcies.⁷

Because FICO credit scores are based on a variety of factors, not everyone is impacted by a bankruptcy in the same way. A person’s credit score before the filing, typically between 300 and 850, will often influence how much it drops. Generally, an average credit score of 680 sees a drop of around 140 points after bankruptcy, and a high credit score, like 780 or above, is likely to drop up to 220 points.⁸

However, if someone with a credit score below 600 files for bankruptcy, they may actually see an increase, albeit a small one. After debts are discharged, delinquent accounts and a high debt-to-credit ratio are often wiped away from the filer’s credit report. Obtaining new loans and credit lines can still be difficult for borrowers with credit scores in this “poor” range, but, for many, the “last resort” of bankruptcy becomes a positive first step on the road to building good credit. They can reach new credit score highs well before the bankruptcy disappears from their credit report.