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As bankruptcy attorneys in St. Louis, we often encounter potential clients who are very nervous about declaring bankruptcy. They’ve been told for years that they’ll “never be able to get credit ever again.”
But nothing could be further from the truth. You’ll be surprised to learn what really happens to your credit report after your bankruptcy discharge.
Your Bankruptcy Gets Listed
Bad news first. You will see your bankruptcy discharge listed on “Public Records.”
If it is a Chapter 13 bankruptcy it will remain on your report for seven years. If it is a Chapter 7 bankruptcy, it will remain on your report for ten years.
But as the years go by, it will have less and less of an impact on potential creditors. In some cases, it will have no impact whatsoever, even if you’re trying to get credit days after receiving your discharge.
And bankruptcy will always have a smaller impact on your credit report than a lawsuit or a foreclosure.
Your DTI Improves
Your debt-to-income ratio will immediately improve because most of your debt is gone.
You may still have a house and car debt. You’ll still have non-dischargeable debts, such as (in most cases) student loan debt.
But all the little credit card debts, overdue medical bills, and other harmful debts will go away immediately, which means you’ll be in a much better position when the time comes to refinance or take on new debts of any kind.
Your Negative Payment History Goes Away
It’s not that all those old collection items just disappear. You’ll see the name of the account, and you’ll see “legally discharged through bankruptcy.”
What you won’t see is the long list of missed or late payments that your old credit report tracked. You won’t see any open balances. Your entire derogatory payment history will immediately look a lot cleaner.
These items remain on your report for seven years from the original date of delinquency. Some of our clients have struggled with collections for many years before choosing to file. This means you may see these items dropping off one by one not long after you receive your discharge.
But even if you don’t, they’re not doing nearly as much harm anymore.
Your Credit Score Goes Up
Most of our clients are very surprised to learn their credit scores go up after bankruptcy, not down. But this is the result of all the other changes.
And some of our clients have gone on to achieve credit scores in the 700s after a lot of hard work and strategic planning.
You’ll find you can rent an apartment right away, and that receiving credit card offers or car loans won’t be a problem. You might not want to take all those offers, but you’ll get them.
And you can easily get a mortgage in 2 years as long as you keep building on the forward momentum your fresh start has created.
So don’t be afraid to file. While the credit and collections industry would like you to believe otherwise, your life will get better, not worse.