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How does Chapter 7 affect your credit score?

On Behalf of | Jan 3, 2020 | Bankruptcy | 0 comments

Chapter 7 bankruptcy in New York can discharge most, if not all, of your debts. This means that you are no longer responsible for paying them, although you may lose some possessions to the liquidation process. However, even when your debts get discharged, Chapter 7 bankruptcy can still affect your credit score, at least for a while.

Your credit score takes a hit upon initially filing for bankruptcy. According to Experian, the bankruptcy still remains on your credit record for up to 10 years after the discharge. However, upon the discharge of your debt, an update to your credit record will reflect this.

Once you owe a zero balance to lenders due to Chapter 7 debt discharge, your lenders will make a report, which will reflect on your updated record as well. However, to ensure accurate updates to your credit report, you should request a free copy for review a couple of months after discharge and report any inaccuracies. These accounts will remain on your record for an additional seven years following discharge, even when they carry a zero balance.

Fortunately, your credit score depends on more than whether or not you have filed for bankruptcy. Improving your debt-to-income ratio through Chapter 7 discharge should help to improve your score and give you the opportunity to start re-establishing credit. As you re-establish credit, the record of your bankruptcy will have less of an effect on you until it drops off your record completely.

The information in this article is not intended as legal advice but provided for educational purposes only.