Is It Possible To Strike a Bankruptcy From a Credit Record? Here’s What We Know
(NewsBroadcast) – Sometimes people declare bankruptcy due to financial hardships experienced from unexpected events like medical issues or job loss. Credit reporting agencies treat bankruptcy as negative event. When listed on one’s credit report, bankruptcy can affect a person for years, prohibiting them from taking on additional credit and limiting other areas of their life.
Can Bankruptcy Be Removed from a Credit Report?
No. If the information is complete and accurate, it is very difficult to get a bankruptcy removed from a credit report. In the rare case that the bankruptcy was reported in error, it can be removed by disputing one’s information with Transunion. Otherwise, the legal process of bankruptcy may stay on your credit report for up to 10 years.
Understanding the Types of Bankruptcy
The two main types of bankruptcy available to consumers are chapter 7 and chapter 13.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy may also be referred to as straight bankruptcy or liquidation bankruptcy. This filing may involve the liquidation of one’s valuable assets to pay off creditors. The remaining unsecured debts (like medical bills and credit cards) are erased. Some debts, like taxes and student loans, are never forgiven. This type of bankruptcy can reduce a credit score by more than 100 points and lasts on the credit report for ten years.
Chapter 13 Bankruptcy
Unlike Chapter 7, which forgives one’s debt, Chapter 13 reorganizes it and sets up a repayment plan to pay creditors over a specific period. With Chapter 13 bankruptcy, liquidation is not required, but the process demands a regular income to repay all the secured debts and part of the unsecured debts in three to five years. The amount payable monthly depends on an individual’s earnings and the debts they owe. This type of bankruptcy is cleared in 7 years and can lead to a potential decrease in credit scores. For instance, a person with a good score of 780 could lose between 200 and 240 points.
How to Rebuild Your Credit after Bankruptcy
Though there is not much one can do about the amount of time bankruptcy remains on the credit report, there are some steps that one can take towards the repair of their credit score.
- Opening a secured credit card
- Paying for bills before the due date
- Understanding your credit limits and staying below a certain usage level
- Monitoring the credit score monthly
- Continuously paying students loans, if any
Not sure what to do next? Consult with a financial advisor or bankruptcy attorney before making a final decision to declare bankruptcy. There may be other options available.
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