woman working on her credit report with a calculator

How Long Does Bankruptcy Appear on A Credit Report?

Lyndon Ruhnke, PC Aug. 25, 2021

If you are considering filing for bankruptcy or have already filed, you may be wondering how long it will affect your credit report. Filing is never an easy decision, but bankruptcy may be the best way to find solid financial footing again. Nearly 3,000 people in Oregon filed Chapter 7 or Chapter 13 bankruptcy in the first seven months of 2021, so you are not alone.

Although bankruptcy will affect your credit for a period of time, with some effort and the right tools, your credit score can rebound more quickly than you might think. An experienced bankruptcy attorney can show you how.

With offices in Gresham, Beaverton, and Portland, Oregon, Lyndon Ruhnke, P.C., can answer your questions about Chapter 7 and Chapter 13 bankruptcy and help guide you through the process. He understands the stress caused by overwhelming debt, the decision to file for bankruptcy, and the work it takes to rebuild your credit.

What is Chapter 7 Bankruptcy?

Chapter 7 is often the preferred bankruptcy for individuals because it discharges most of your unsecured debt. This includes credit card debt, the money you owe for medical expenses, and unsecured loans such as “payday” loans. Child support and student loan debt is not discharged through Chapter 7 bankruptcy. Nor is any dischargeable debt you failed to submit to the court.

You may be able to discharge some secured debt, such as your auto loan or mortgage, but beware that since the lender holds a lien on your car and home, they could repossess them.

You will have to meet an income requirement to file for Chapter 7 bankruptcy. It is designed for people who have little disposable income left each month after paying certain living expenses. A Chapter 7 bankruptcy remains on your credit report for 10 years.

What is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is referred to as the “wage earner’s plan” for debt relief. If you have enough disposable income after paying key living expenses each month, you will not qualify for Chapter 7. In Chapter 13, your debt is restructured, and you agree to repay at least some of what you owe over a period of three to five years. You essentially commit all your disposable income to the repayment of your debt.

One of the advantages of Chapter 13 is that you can keep your home and your car since you will continue paying your mortgage and auto loan. Another advantage is that Chapter 13 negatively impacts your credit score for a shorter period than Chapter 7. It remains on your credit report for up to seven years.

How Much Does Bankruptcy Affect My Credit Score?

The two most important components of a credit score are a history of timely payments on debt and the percentage of credit lenders have offered you that you are using at any period of time. A good credit score will reflect a debt-to-credit ratio of 30% or less. That means you should not be using more than 30% of all available credit at any time.

If your credit cards are maxed out and you are making only minimum monthly payments, your credit score is likely to already be low. Bankruptcy will give you the opportunity to recover your financial footing so you can raise your score much higher than it was prior to bankruptcy.

What Can You Do to Help?

There are steps you can take to not only restore your credit score but start a new life of financial wellbeing.

  • Consider getting a secured credit card. With an unsecured credit card, a lender gives you a line of credit you can use up to the maximum amount. An unsecured credit card allows you to spend only the amount of money you have in an account, similar to a debit card. Unlike a debit card, however, you can use the secured credit card to make small purchases and pay the balance back monthly which raises your credit score.

  • Check your credit report. Once any debts have been discharged through bankruptcy, check your credit report verify that the discharged debt appears as such on the report.

  • Start rebuilding your credit. In order to qualify for a house or car loan, the lender will generally require that you have at least two credit accounts (either secured or unsecured). They will look to see that you use the credit and use it correctly meaning that there are no missed or late payments. Make sure you pay in full and on time.

Although it takes some time and determination, rebuilding your credit is in your control. Attorney Lyndon Ruhnke can provide the guidance and resources you need to get back on track in as little as two years.

Getting Help from an Experienced Oregon Bankruptcy Attorney

Bankruptcy can provide the fresh start you need. It's an opportunity to hit restart and rebuild your credit from the ground up using important guidance and resources from your attorney.

Lyndon Ruhnke, P.C., places a high value on service with dignity, respect, and attention to detail. He is dedicated not only to guiding you through bankruptcy but changing your life for the better. He has represented clients in Gresham, Beaverton, Portland, and throughout the State of Oregon facing the same challenges you are facing now. From the beginning of the bankruptcy process through the removal of it from your credit report, he will be there to guide you.

Time and effort will put your credit score right after bankruptcy. Call Lyndon Ruhnke, P.C. for a free consultation.