According to bankruptcy law, your filing will remain on your credit report for ten years. However, you can start repairing your credit right away. In other words, filing for bankruptcy will have a significant impact on your credit, but it won’t ruin it for good. 

While your credit score will drop initially and the bankruptcy will stay on your credit report for several years, it’s not a permanent mark.

Making timely payments on your car, mortgage, rent, and other bills will help your credit score after you have been discharged from bankruptcy. Many people who have filed for bankruptcy can purchase a car or even a home within a year of filing!

What Is The Immediate Impact On Credit When Filing For Bankruptcy?

Filing for bankruptcy has a significant initial impact on your credit score. Bankruptcy is considered a major negative event by credit reporting agencies, and it can cause your credit score to drop dramatically, often by 100 to 200 points or more, depending on your starting score. This drop occurs because bankruptcy shows that you are unable to meet your financial obligations, which is a red flag for lenders.

However, many factors influence how big this impact is and how it’ll affect your credit report. The type of bankruptcy is usually the first thing that indicates how long it’ll stay on your credit report. Keep in mind that Chapter 7 bankruptcy remains for up to 10 years, while Chapter 13 can stay for 7 years.

Will Bankruptcy Wipe Out All Of My Debts?

Not every debt can be discharged in bankruptcy. In a Chapter 7 bankruptcy, most unsecured debts, such as credit cards, medical bills, and personal loans, can be discharged. However, certain obligations, such as child support, alimony, most student loans, and tax debts, are typically non-dischargeable. Similarly, you will still owe secured debts, such as mortgages or car loans, unless you surrender the assets that secure these loans. In Chapter 13, debts are restructured rather than eliminated, allowing you to pay them over time. While bankruptcy offers substantial relief, it’s important to understand which debts will still need to be managed after the process is complete.

Will I Lose All My Assets If I File For Bankruptcy?

Whether you lose assets in bankruptcy depends on the type you file. In Chapter 7 bankruptcy, some of your assets may be sold (liquidated) to pay off creditors. However, each state has “exemptions” that allow you to keep certain essential assets, like your home, car, personal belongings, or retirement accounts. Chapter 13 bankruptcy, on the other hand, allows you to keep your assets while setting up a repayment plan to pay off debts over time. Many people can keep most, if not all, of their property during bankruptcy, but it’s important to discuss specific exemptions with a bankruptcy attorney to understand how your assets may be affected.

Can I File For Bankruptcy More Than Once?

Yes, you can file for bankruptcy more than once, but there are restrictions on how often you can do so and receive a discharge. For example, if you previously filed for Chapter 7 bankruptcy and received a discharge, you must wait eight years from the filing date before filing for Chapter 7 again. If you filed for Chapter 13 bankruptcy and received a discharge, you must wait two years before filing another Chapter 13 case. If you’re switching between Chapter 7 and Chapter 13, the waiting periods differ. The timeframes are in place to prevent abuse of the bankruptcy system, but multiple filings are allowed under specific conditions. Consulting with an experienced Arizona bankruptcy lawyer can help clarify these rules.

Can I Rebuild My Credit After Filing For Bankruptcy?

Yes, you can rebuild your credit after filing for bankruptcy. To start the rebuilding process, create a budget and stick to it so you avoid falling into debt again. Secured credit cards are a great way to demonstrate responsible credit use; by making timely payments, you’ll slowly improve your credit score. Keeping balances low, avoiding new debt, and making all bill payments on time are crucial steps. Within a few years, with consistent effort, you can recover a healthy credit score, making it possible to qualify for loans, credit cards, and even home mortgages in the future.