When Does My Bankruptcy Expire?

Bankruptcy is a last resort for many individuals who are experiencing financial issues. Before an individual makes this very serious move to resolve financial problems, it is important to first understand all of the consequences, including how long it takes for a bankruptcy filing to expire from a credit report.

What Is Bankruptcy ?

When someone files for bankruptcy, he declares that he is officially unable to manage his debts. Bankruptcy proceedings, which are initiated in court, legally release the individual from all or some of his debts. In other cases the filer can arrange a reduced payoff schedule. An individual has several different bankruptcy filing options including Chapters 7, 11, 12 and 13.

When Does It Expire?

When a consumer files for bankruptcy that automatically gets listed on his credit report. It is a matter of public record. A Chapter 13 bankruptcy filing remains on the individual's report for seven years while Chapter 7, 11 and 12 filings stay on for a minimum of 10 years. Chapter 13 has a lesser term due to the individual's agreement to make some payments toward the debt over time.

Downsides

It is very difficult, if not impossible, for an individual to get approved for credit as long as the bankruptcy is listed. One of the first questions asked on many credit applications is "have you claimed bankruptcy within x amount of years ?" A positive answer to that question in addition to the credit check usually leads to an automatic rejection by the creditor. A person who has claimed bankruptcy must be prepared to live on a cash basis until the listing expires. A bankruptcy listing can also negatively affect an individual's ability to get new employment.

Avoiding Bankruptcy

Before choosing bankruptcy, a consumer should first consider all alternatives. The most logical step is to contact a credit counselor. Non-profit credit counseling organizations like the National Foundation for Credit Counseling provide advice to consumers on how to modify their budgets and get debt payments down to a manageable level. The counselor may also help the consumer start a debt management plan, which combines all payments into one. When the consumer pays, the DMP plan provider pays off credit cards on his behalf until the debt is satisfied.