When Is a Chapter 7 Bankruptcy Deleted?

Dear DGM,

Bankruptcies are deleted from credit reports based on the filing date. The discharge date has no effect on when the bankruptcy or accounts included in the bankruptcy are deleted.

Chapter 7 vs. Chapter 13

Chapter 7 and Chapter 13 bankruptcies are the two most common types of consumer bankruptcies. The process for each is different, as is the length of time they remain on your credit report.

In a Chapter 7 bankruptcy, also known as straight or liquidation bankruptcy, there is no repayment of debt. Because all your debts are wiped out, Chapter 7 has the most serious effect on your credit and will remain on your credit report for 10 years. The accounts included in the bankruptcy, however, are removed from the credit report earlier than that.

In a Chapter 13 bankruptcy, your debts are restructured and you typically pay a portion of them over three to five years. A Chapter 13 bankruptcy is deleted seven years from the filing date and has a lesser effect on your credit than Chapter 7.

What Accounts Are Included in Bankruptcy?

Usually, a person declaring bankruptcy is having serious difficulty paying their debts and their accounts are often significantly delinquent.

If an account was delinquent when it was included in the bankruptcy, it will be deleted seven years from its original delinquency date, which is the date the account first became late and was never again brought current. Declaring bankruptcy does not alter the original delinquency date or extend the time the account remains on the credit report.

If the account was never late prior to being included in bankruptcy, it will be removed seven years from the date the bankruptcy was filed.

Rebuilding Your Credit After Bankruptcy

You don't have to wait until your bankruptcy is removed to begin rebuilding your credit history. The good news is that as time goes by and you begin to reestablish your credit, the bankruptcy notations will begin to affect you less and less.

Here are some ways to help your credit recover from bankruptcy:

• Make all your payments on time. Payment history has the biggest effect on your credit, so if you have accounts that were not included in the bankruptcy, such as a car loan, home loan or student loan, be sure to keep those accounts current.
• Consider a secured credit card. If you're in a better place financially, consider applying for a credit card. Showing creditors that you can successfully manage a credit account will help improve your credit. If you can't qualify for a traditional unsecured credit card right away, you may be able to get a secured credit card. With a secured card, you give the card issuer a deposit, which typically serves as your credit line. Be sure the card issuer reports account activity to all three credit bureaus (Experian, TransUnion and Equifax) so you can build your credit using the card.
• Ask a family member to cosign. If you have a family member with good credit who is willing to cosign, you may be able to qualify for a small loan or credit card. Keep in mind that any missed payments or high balances will appear on your cosigner's credit report as well as yours, so it's important to make every payment on time and keep balances low.
• Become an authorized user. A loved one who is responsible with credit may be willing to add you as an authorized user on their credit card account. Being an authorized user on a credit card is not the same as holding a joint account: An authorized user has permission to use the credit card, but is not responsible for making payments. Not all lenders report authorized accounts to the credit reporting companies, so check with them first.
• Add your utility and cellphone payments to your credit report. Experian offers a free tool called Experian Boost^®ø that allows you to increase your credit scores instantly by including your on-time utility and cellphone payments on your credit report. The enrollment process is fast, easy and secure. It includes a FICO 8 Score at the start of the process and provides you with an updated FICO 8 Score when you complete the process, so you can see how much your score improved.

Thanks for asking.
Jennifer White, Consumer Education Specialist