Filing for bankruptcy can be an incredibly overwhelming process. However, you may be pleased to learn that the benefits can make the stress of filing worth it, as you can receive serious debt relief, as this process eliminates eligible debts. Unfortunately, this does not happen without some drawbacks to ensure that only those who truly need to file will utilize this process, so as not to take advantage of the system in place. One disadvantage of filing is that bankruptcy can remain on your credit report for an extended period of time. For Ohio residents in Franklin and Columbus Counties who are struggling with debt, understanding how bankruptcy impacts credit scores and how long the impact will last is one of the most common concerns before filing. To learn more about this impact and how long you can expect this to remain on your report, you’ll want to keep reading. You’ll also learn why working with Franklin County bankruptcy lawyers is in your best interest during this difficult time.

How Does Bankruptcy Impact My Credit Score?

When you file for bankruptcy, the primary purpose is to obtain debt relief. Because certain debts will be wiped away, meaning you no longer have a legal obligation to repay them, it can reflect negatively on your credit report.

One of the primary reasons is that your borrowing history makes up the largest factor of your credit score at 35%. As a result, this severe negative event will cause your credit score to plummet.

Unfortunately, you’ll find that the higher your credit score is pre-filing, the more it will fall. Those with an excellent score can lose up to 200 points, while those with an average score may see a 150-point drop.

This is because bankruptcy is a red flag to lenders, showing that you have been unable to repay debts in the past.  As such, creditors who see this on your report are less likely to extend loans in your name. In the event you are approved, however, you may find that the interest rates for the loan you are approved for are astronomical in comparison to the rates you would be offered had you not filed for bankruptcy.

Why Bankruptcy Can Cause a Significant Credit Score Drop

  • Bankruptcy indicated a legal discharge of someone’s debt obligations
  • Payment history is the most considerable component of most scoring models
  • Lenders view bankruptcy as a sign of high-risk borrowers
  • This becomes part of your public financial record
  • Future lenders may interpret the filing as a past inability to repay debts

Important Takeaways

  • Bankruptcy can cause a credit score to drop between 130 and 200 points
  • How much bankruptcy will impact your credit depends on the score prior to filing
  • Higher scores often endure larger drops
  • Credit scores may begin improving within months after the debt discharge
  • Adopting responsible habits can improve credit over time

How Long Does Bankruptcy Remain on My Report?

Bankruptcy filings in Ohio proceed under the United States Bankruptcy Court system, wth most residents in Franklin and Columbus Counties filing through the Southern District of the Ohio Bankruptcy Court. Though federal laws determine how long a filing will remain on your report, local court procedures will impact how quickly your case moves.

Unfortunately, because your payment history makes up such a significant portion of your credit score, the history will extend far back.

As such, if you file Chapter 7, you’ll find that this process will remain on your credit report for 10 years. Chapter 13, on the other hand, will only remain for 7 years from the date on which you filed. This process is generally faster because you are repaying a portion of the debts, unlike Chapter 7.

Credit Report Timelines for Bankruptcy Filings

The length of time a bankruptcy filing will remain on your credit report depends on the chapter you file under.

  • Chapter 7 generally remains for ten years
  • Chapter 13 generally remains for seven years
  • The timeline begins on the date you formally file for bankruptcy
  • Credit reporting agencies automatically remove the filing when the reporting period ends

Steps You Can Take to Rebuild Credit After an Ohio Filing

Though filing for bankruptcy can significantly impact your credit score, it does not mean your financial future is permanently damaged. Many individuals begin rebuilding their credit soon after their bankruptcy. Taking consistent financial steps post-filing can help gradually increase your credit score and demonstrate responsible habits to lenders

Practical Ways to Begin Rebuilding Your Credit

  • Create a strict monthly budget to avoid future debts
  • Make on-time payments for all current financial obligations
  • Keep your credit balances low
  • Consider applying for secure credit cards or builder loans
  • Regularly review your credit reports

Contact and Experienced Franklin County Bankruptcy Attorney

If you are considering filing for bankruptcy in Ohio, it is imperative to understand the importance of working with an experienced attorney to guide you through this process. Not only can your attorney guide you through this complex process, but they can also help ensure you do not make any errors that can prolong or jeopardize your case. At Cousino & Weinzimmer LLC, our firm understands how difficult these complex issues are, which is why we are ready to represent you. Contact us today to learn more.