When Can I Get a Bankruptcy Off My Credit Report?

Article updated by Mia Taylor May 21, 2018

Filing for bankruptcy in order to deal with overwhelming debts can be a frightening and confusing prospect.

But if you’re among those who have opted to use this approach in order to turn a troublesome financial picture around, you’re probably wondering what the next step should be. And more importantly, how long it takes to get that bankruptcy removed from your credit reports.

The good news is, bankruptcy filings don’t mean the end of obtaining credit and in fact you can try to speed up the removal process, while also rebuilding your financial profile quite successfully.

The Two Types of Bankruptcy

To begin with, it’s important to understand that there are two types of bankruptcy.

Chapter 7 bankruptcy is full liquidation of your assets and it does not involve filing a repayment plan. Instead assets are sold and the proceeds are used to cover the debts. It takes 10 years (from the date of filing) for this type of bankruptcy to come off your credit report.

Chapter 13 bankruptcy on the other hand allows individuals to develop a plan to repay some or all of their debts over the course of three to five years. The bankruptcy itself will automatically be deleted from your report seven years from its filing date.

Can You Speed up the Removal Process?

Under some circumstances it may actually be possible to get a bankruptcy removed from your credit report sooner than expected.

“There is a big misconception that bankruptcy cannot be removed from a credit report and that you have to sit out seven to 10 years,” says Ash Exantus, director of financial education and a financial empowerment coach at BankMobile. “The truth of the law or the way law is written, there’s a maximum amount of time a bankruptcy can remain on your report, but there is no minimum amount of time.”

In other words, there’s nothing stopping you from getting that bankruptcy removed before seven to ten years.

How do you do that exactly? File a dispute with the three credit bureaus.

Review your bankruptcy filing and the items related to your bankruptcy that appear on your credit report carefully, advised Exantus. If you find any incorrect information, you can file a dispute.

“If there is anything that’s inaccurate on a credit report, it must be removed,” Exantus continued. “The bankruptcy has to be reported correctly. You want to make sure that’s the case. Names, social security numbers, personal information, must all be reported correctly. Any error in the way it was reported is grounds for having it removed from your credit report.”

In addition, when you file a dispute with the credit bureau it must be verified and validated in order for it to remain on your credit report. If the items you are disputing were not verified properly or if they are not verified within 30 days of your dispute by the credit bureaus, they must be removed from the report and this includes bankruptcies.

Turning Your Financial Picture Around

Before you start thinking about when you might be able to get that next credit card or line of credit again, it’s important to make sure you correct whatever behaviors got you into trouble in the first place.

“First and foremost, and most people don’t realize this, before getting back into the credit game or applying for anything, make sure your financial habits are fixed,” said Exantus. “Whatever you did that required filing bankruptcies, you now need to establish good financial habits. That includes things like paying yourself first, saving money, creating an emergency fund. All of these things are so directly tied to credit and the ability to manage credit and money.”

When Can You Get a Line of Credit Again?

Once you’ve established good financial habits, the best way to start rebuilding your credit profile and score is to obtain a secured loan of some type. This includes secured credit cards from a bank or a line of credit.

“Most banks will approve you for an approved secured credit card a few years after filing bankruptcy. That should be the next step someone takes,” Exantus said.

In addition, don’t be surprised if you start receiving credit card offers during the seven to 10 years that a bankruptcy remains on your report. Credit card companies make more from customers who have low credit scores or bankruptcies.

“You are a prime candidate for credit because most credit card companies know that a person has filed for bankruptcy and that they are going to want to get credit again. And they know they can charge you a higher interest rate because you have a lower credit score,” Exantus added.

Filing Bankruptcy is Not the End of the World

While bankruptcies may be a somewhat unpopular topic or continue to carry a stigma socially, there can be a silver lining to going down this road.

“From credit perspective, it’s a master reset on your credit, you are starting from scratch,” said Exantus. “And I’ve personally seen people who have filed for bankruptcy and in a couple of years their scores are in the high 700 or 800 range – because they have established better financial habits.”

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Image: iStockphoto

This article has been updated. This article was originally published April 18, 2013.

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