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Examining the impact of bankruptcy on credit scores

When unemployment or an unexpected life-change forces a Massachusetts resident to consider filing for bankruptcy, they will have a number of questions and concerns. One concern often raised is the effect of a personal bankruptcy filing on their credit report.

Credit reports have taken on tremendous importance in Americans' lives. They are no longer used only to determine whether a person qualifies for a car loan, a bank loan or a mortgage.

Nowadays, they can determine whether one can rent an apartment or even get a job. Accordingly, it is understandable that an individual contemplating a Chapter 7 or Chapter 13 bankruptcy would be concerned about the effect on their credit report.

A Chapter 7 bankruptcy will stay on an individual's credit report for 10 years from the date the bankruptcy was filed with the court. Once a Chapter 13 bankruptcy case is completed, the leading credit reporting companies will remove it from the report seven years after the filing date.

During the time, a bankruptcy appears on a credit report, its effect on lending and other decisions will depend on how old it is. The older it gets, the less importance lenders will attach to it. At some point, lenders will be more interested in seeing a positive history of payments after the bankruptcy.

Although bankruptcy can have a negative effect on one's credit for a period of time, it is important to remember that not filing bankruptcy can perpetuate a negative credit score for an even longer period of time. If one does not file bankruptcy, unpaid bills and late payments may continue and the credit issues will remain until resolved.

Source:, "How Long Does It Take for Something to Be Removed From My Credit Report?," Constance Brinkley-Badgett, Jan. 26, 2016

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