How long does it take to recover from bankruptcy BF Blog

How Long Does It Take to Recover from Bankruptcy

The decision to file bankruptcy can be the hardest and most often the easiest to make when faced with insurmountable debt. What makes it so hard is the negative impact on your credit report. What makes it so easy is the relief from having a fresh start. However, how long does it take to recover from bankruptcy? It depends on the type of bankruptcy you file for and how quickly you work to improve your credit with the credit bureaus. It may also depend on how quickly you can get your bankruptcy case through the bankruptcy court.

Let’s explore the types of bankruptcy cases, the bankruptcy filing, and the impact on your credit reports—finally, steps you can take to begin improving your credit score immediately. The good news is that you can reduce how long it takes to recover from bankruptcy.

Types of Bankruptcy Cases

What is Chapter 7?

Chapter 7 Bankruptcy cases discharge unsecured debts such as credit cards, medical bills, and personal loans. However, this is often accomplished by selling off non-exempt assets. Such as a second home, car, boats, jewelry, etc. Chapter 7 Bankruptcy takes ten years to be removed from your credit report.

What is Chapter 13?

Chapter 13 discharges unsecured debts and will allow you to catch up on your secured debts such as a house or car payment. However, this is accomplished by the courts creating a repayment plan that could last between three to five years. Chapter 13 Bankruptcy takes seven years to be removed from your credit report.

In contrast, late payments, foreclosures, and collections also stay on your credit report for seven years before being removed via a bankruptcy discharge.

Chapter 7 vs. Chapter 13

In some cases, filing Chapter 7 versus Chapter 13 can be faster. However, Chapter 13 allows you to keep your property.  However, the courts can make it easier for you to get out of debt by restructuring your debts. With the court’s reorganization plan, they can reduce the payments and modify the principal of loans.

Chapter 7 costs about $335 and Chapter 13 costs about $310. However, these fees can be waived, or monthly installments may be allowed by the court.

The Bankruptcy Decision

The first step in the bankruptcy process is to decide if this is the best course of action for you.  Is there any way you can pay off this debt on your own by any other means? Do you have assets to sell? Can you obtain a low-interest loan to consolidate your debt? Let’s review the different types of debt that can be discharged by the courts.

Accepted Bankruptcy Debt

  • Unsecured Debt
  • Medical Bills
  • Car Loan
  • Personal Loan

Unaccepted Bankruptcy Debt

However, there are types of debt that typically cannot be discharged and should be carefully reviewed before going through the process of bankruptcy.

  • Child Support
  • Spousal Support
  • Court order Debt owed as a result of divorce.
  • Attorneys’ fees from child custody or support
  • Federal Funded Student Loans
  • Taxes
  • Alimony
  • Debt that was not discharged in a prior bankruptcy discharge.
  • Debts related to drunk driving cases.
  • Government fines, penalties, or restitution.
  • Debt that is associated with willful and malicious injury to a person or property.
  • Condo or cooperative housing fee debts

Most importantly, this is not an exhaustive list as there could be additional debt the court may not approve during the bankruptcy process. A bankruptcy attorney in your state can provide the exact list of debts that can and cannot be discharged.

Bankruptcy Attorney

Once you have decided you need to file for bankruptcy consult a bankruptcy attorney. Most will provide a free consultation to confirm your assessment of your need for filing bankruptcy. In addition, they will also advise you of all your legal rights.

You can obtain a good lawyer from a friend or family member, searching online, from the National Association of Consumer Bankruptcy Attorneys, the State Bar Association at your location, or online legal directories like NOLO.

The Bankruptcy Process

  • Pre-bankruptcy counseling to assess the feasibility of filing for Chapter 7 or 13 or not at all.
  • Filing the bankruptcy petition will require that all documentation be submitted on time and that the Means Test for Chapter 7 is satisfied.
  • Automatic stay will prevent your creditors from contacting you. The courts will automatically submit this information to your creditors.
  • Meeting of Creditors or Creditor’s meetings must be attended by all debtors to verify identity and the information in the bankruptcy forms. The creditors can attend but it is not required.
  • Debtor education course must be completed by all debtors upon filing for bankruptcy.
  • Notice of discharge will be sent to all the creditors informing them that the debt has been discharged and to no longer attempt to collect via phone calls, mail, or email.
  • Liquidation of assets on Chapter 7 to pay off any creditors as part of the bankruptcy process.
  • Repayment begins under the conditions of the bankruptcy settlement.
  • Debt discharge is the process of canceling the debt. This happens about 3 months after you file.

The courts do not notify the credit bureaus regarding bankruptcy. However, it is a public record, and credit bureaus are required to update their records with “Included in Bankruptcy” and with a $0 balance noted. Subsequently, they have up to 60 days of a Chapter 7 bankruptcy discharge to comply.

After Bankruptcy

Expect your credit score to drop between 130 and 150 points with an average score of 680. However, if your credit score is 780 or better expect it to drop by 200 to 240 points.

Hence, with a credit score of 680, you are looking at a new score of about 530 at worst. If your score is at 780 you are looking at a new score of about 540. These scores are considered bad. Most importantly, with scores this low it will be very difficult to obtain a decent car loan or a mortgage.

However, with dedication and good financial products, you can improve your credit file over time. There is no quick fix no matter what claims are made by any financial institution. However, your credit score can improve but it could take 12 to 18 months if you are very careful about how you handle credit going forward. A score of 800 or more will take the full seven to ten years.

Your credit score is made up of five components:

  • Payment history (35%)
  • Credit usage(30%)
  • Length of time of credit accounts (15%)
  • Credit mix (10%)
  • New credit inquiries (10%)

Certainly, it would be in your best interest to concentrate on making on-time payments each month and keeping your credit usage under 10% of your available credit balances on credit cards and a credit line. The two combined make up 65% of your FICO Score. Above all, it is a good idea to concentrate on these two indicators first.

Rebuilding Credit

In most cases, your credit will begin to improve once all the derogatory remarks are removed and you are still in good standing with other loans you may have, such as a mortgage, car loan, etc.  However, the initial impact of bankruptcy weakens over time until it eventually is removed from your credit report within 7 to 10 years.

However, there are additional options available. i.e. a Secured credit card, a Credit-Builder Loan, or becoming an authorized user which can be the best option to improve your credit score.

Secured Credit Card

The best way is to obtain a Secured credit card using your own money to begin building up your credit history. This type of credit card will allow you to build credit by setting aside your funds to use for purchases. This is very different from using an unsecured credit card. The biggest difference between a secured and an unsecured credit card is the security deposit. Unsecured credit cards don’t require a deposit to open an account. 

However, I caution you not to begin applying for more than one new credit card at a time.  Applying for multiple credit cards could lead you back into bankruptcy court if you over-extend your financial situation once again. Just because you think you can afford the monthly payments does not mean you should make that purchase.

Credit Builder Loan

Other services also help you build credit. They are called credit-builder loans that can help you build your credit rating. Hence, they can help provide a fresh financial start after you file for bankruptcy and build savings.  They are designed to build credit and be a savings account builder. You make fixed payments into a savings account over a length of time. When you complete the terms, the balance will be transferred to you. It could even include interest.

Authorized User

As a last resort, you can ask a friend or family member to allow you to be an authorized user on their credit card. They would only have to notify their financial institution that they are adding you as an authorized user. You will need to provide your full name, date of birth, and in some cases your social security number.  The financial institution will send the new card to the primary cardholder.  It will be their decision to share that card with the authorized user.

Things To Avoid

While you are in the process of building your credit there are things you should avoid. These safeguards will prevent consumer debts from escalating out of control again. Please note that credit card debt is at an all-time high. In 2022, the average American household had $7,951 in credit card debt. 61% of Americans have credit card debt. It is so easy to fall into the credit card trap with the amount of financial properties available.

  • Late payments. Try to make on-time payments each month even if it is just the minimum.
  • Using more than 10% of the available credit balance.
  • Closing Credit Accounts
  • Unaffordable monthly payments.
  • Applying for too many credit cards at once.
  • Not reviewing the interest rates on potential credit cards.
  • Paying for Credit Repair Services with Claims of Bankruptcy Removal.
  • Using a debit card because it does not build credit.

Financial Goals

With this new start, this is the time to set financial goals. This is the perfect time to work on creating financial stability by creating a budget and having an emergency fund. Set up checking accounts with automatic payments to avoid late payments. Consequently, you should make it a habit of saving for the things you need to buy rather than relying on credit card companies to supplement your lifestyle. Look at this opportunity as a second chance to correct habits that contributed to having bad credit.


Here are some additional steps you can add to your debt management plan that can help you.

  • Begin working on improving your credit score right after bankruptcy.
  • Choose the best option for building credit that meets your credit goals.
  • Make timely payments automatically to avoid late payments.
  • Watch your credit card balances to maintain a 10% utilization rate.
  • Order your free credit score report annually and check it for any discrepancies.
  • Check your Fico Score using Credit Apps like Credit Karma and Credit Sesame or via your online or mobile bank account.
  • Avoid racking up credit card debt.
  • Budget and save.

This content is for information purposes only.  I do not endorse any of the companies mentioned.  Please research and do your due diligence. Also, I do not get paid if you click any of the links.

Additional Resources:

Can A Bankruptcy Discharge Be Denied

How To Manage Credit Card Debt

What Hurts Your Credit Score The Most?

Importance Of Adding Tradelines To Your Credit Report

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