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How Long Does a Chapter 7 Bankruptcy Stay on Your Credit Report?

How Long Does a Chapter 7 Bankruptcy Stay on Your Credit Report?

Bankruptcy processes can be very different from each other, depending on the characteristics of each person, the debt, and the chapter that applies. However, there are some variables that are uniform for any debtor. When filing bankruptcy, it is important to know all the options and the consequences that each of them will have. One of the questions that arise when starting the process is how long the chapter 7 bankruptcy stays on the credit report. This doubt is relevant, especially thinking about the future and the recomposition of the person’s credit. In this post, you will find the answer to this and other questions.

First of all, let’s briefly recall what Chapter 7 bankruptcy is all about. Also called liquidation bankruptcy, this is one of two options available to individuals for filing bankruptcy. Through this procedure, the court liquidates or sells the debtor’s assets to meet the obligations. That is why this option is considered faster than chapter 13, since it allows you to reduce debts in less time.

It is worth clarifying that the liquidation of assets is not as terrible as it sounds, since not all of the person’s possessions are sold. Personal items such as clothing and other possessions, work tools, or retirement savings are exempt from the assessment. The vehicle and the home can also be included in this exception, as long as the values ​​are adjusted within the limits of the law. In many cases, the liquidation of assets is very minor, so the resolution ends up being very favorable for the debtor.

What are the deadlines for Chapter 7 bankruptcy

In addition to knowing how long a chapter 7 bankruptcy stays on your credit report, it’s also important to know how long it takes from filing to completion. In general, the estimated duration of the process is 4 to 6 months. Of course, these times can be modified according to the complexity of each case. The first thing to do is a credit counseling session, which is prior to bankruptcy. This certificate is valid for 180 days, so you must present it within 6 months after completion.

Once this is done, and the filing has begun, the trustee will contact you to begin the process. This can take between 15 and 20 days for the evaluation of your case. After this first contact, the administrator will take between 60 and 120 days to complete his work. This time can vary according to the complexity, especially the number of creditors who object. In the face of a large number of creditor filings, the time may be extended a little longer. Taking this into account, it is still highly likely that the process will take a total of 6 months, a much shorter time than the chapter 13 bankruptcy takes.

Learn how long a chapter 7 bankruptcy stays on your credit report

Once the entire Chapter 7 bankruptcy process is complete, you’ll be ready for a fresh start. However, it is important to note that the consequences are not entirely free. From the moment of final registration, your personal credit report will have a negative element that will remain for 10 years. This does not mean that during that time you will not be able to rebuild your credit, but you should keep in mind that the report will indicate it.

Regardless of how long a chapter 7 bankruptcy stays on the credit report, the time since filing should be considered. In the US credit system, negative marks lose importance over time, even as they continue to appear on the report. For example, a payment default from the last month has a much greater impact on your credit score than one made years ago. Ultimately, the more time that passes since your final discharge, the less your bankruptcy will impact your financial rating.

There are some actions you can take to rebuild your score faster. For example, you can start by getting a secured credit card or applying for a small loan, to start building a favorable compliance record. You can add new accounts, always in a limited number, since a rapid increase in debt does not positively affect your score. Try to keep your line of credit utilization ratio below 10% to sustain a higher score. After about 6 months, when your score is more favorable, consider obtaining a loan for a car or similar, to continue building your positive history.

How Long Does a Chapter 7 Bankruptcy Stay on Your Credit Report: Compared to Chapter 13

Always when starting a bankruptcy process, the possibility of opting for chapter 7 or chapter 13 should be evaluated. In many cases, it is not possible to choose since the requirements are different. But in others, the option of one or the other is present, with its respective advantages and disadvantages. In general, Chapter 13 has fewer requirements, since it establishes a long-term payment plan instead of liquidating the assets. For this reason, the duration of Chapter 13 bankruptcy can be much longer than Chapter 7. In general, Chapter 13 bankruptcy establishes monthly payments for a duration of 3 to 5 years. During that time, the process remains open.

So, when thinking about how long a chapter 7 bankruptcy stays on the credit report, the same should be considered for chapter 13. While in chapter 7 the stay on the report is 10 years from the date of discharge , in chapter 13 the permanence is 7 years from the date of registration. Although the time may seem shorter, the 3 to 5 years it takes to finalize the payment plan must be added. For this reason, the negative mark will end up remaining between 10 and 12 years in total, giving a time similar to or even greater than that of chapter 7.

Final Recommendation for Chapter 7 Bankruptcy

As you can see, there are many issues to consider when filing for bankruptcy. In addition to choosing from the available options, you will need to make court filings to get approval and answer to the judge and creditors. All this may require some preparation and prior knowledge that not all people have. Therefore, it is essential to have the help of a professional.

Michael J. Brooks is an experienced bankruptcy attorney in Miami with extensive experience and recognition in the sector. He will be able to advise you on things like how long a chapter 7 bankruptcy stays on your credit report and represent you if you want to start the process. Do not hesitate to contact Bankruptcy Now to clear up all your doubts about his case and start recovering your finances.

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