Bankruptcy

One of the great myths about bankruptcy is that it erases bad credit history. It doesn't.

Declaring bankruptcy frees you from paying all or part of the debt you owe. Accounts will be updated in your credit report to show “included in bankruptcy.” However, the accounts will not be deleted from your credit report.

Chapter 13 bankruptcy remains on your credit history for seven years. Chapters 7 and 11 are reported for 10 years. Credit accounts may be deleted at different times depending on their status prior to being included in bankruptcy.

For example, an account that was current when you declared bankruptcy will remain on file seven years from the date it was included in bankruptcy. An account in collection when you declared bankruptcy still will be deleted seven years from the original delinquency date that led to the charge off, so it may be deleted before the bankruptcy is.

Bankruptcy isn't an easy way to escape a bad credit history. It doesn't erase your credit report so you can start over with a clean slate. It does stop collectors from calling, but creditors stop calling, too.

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