Last time, we began looking briefly at how the type of bankruptcy for which a debtor files can impact his or her financial life post-bankruptcy. Another important issue to consider regarding the impact of bankruptcy is how it will impact a debtor’s credit score and his or her access to credit.

Exactly how a bankruptcy filing impacts a debtor’s credit score and credit availability depends on various factors. Whether, and to what extent, a debtor experiences a decreased credit score, depends on where he or she is at when the bankruptcy filing is made. In some cases, the drop in a debtor’s credit score will be significant, especially if he or she quickly shifts from being a distressed debtor who is regularly making his or her monthly payments to a bankrupt debtor under the protection and supervision of a bankruptcy court. On the other hand, distressed debtors who have long delayed a bankruptcy filing may not experience a significant change in their credit score. 

The type of bankruptcy for which a debtor files does also impact his or her credit reporting as well. According to Experian, one of the three major credit reporting agencies which make credit reports available to consumers, a Chapter 13 bankruptcy filing remains on the debtor’s credit report for seven years after the filing date, whereas a Chapter 7 bankruptcy remains on his or her credit report for 10 years after the filing date. The longer a bankruptcy is reported, of course, the longer it will continue to impact the debtor’s credit profile.

After bankruptcy, most lenders have a diminished ability to obtain quality credit cards, low-interest loans and other forms of credit. The temptation, for many debtors, is to swear off credit and let one’s credit self-rehabilitate. The best thing one can do to speed up the process, though, is to actively make wise use of the credit that is available and to move on to better forms of credit as they become available. Also important is to check to make sure the credit agencies are properly reporting on income which has been discharged in bankruptcy. An experienced bankruptcy attorney is able to help provide guidance in this area.