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When the weight of debt becomes crushing, some people choose to file bankruptcy to relieve the pressure. You may be at the point where you need to do so. Yet, you may fear moving forward because of how it could affect your credit. While bankruptcy will cause your credit score to drop, you can start rebuilding it sooner than you would think.

Bankruptcy’s impact on your credit

Whether you file Chapter 7 or Chapter 13 bankruptcy, your credit score will decrease as a result. The amount it plummets by, though, will depend on your unique situation, as well as your credit score before filing bankruptcy. If you currently have good credit – considered a score of over 700 – your score could drop by over 200 points. Yet, if your credit is fair or poor, your score may not drop by that much.

Keep in mind that Chapter 7 bankruptcy will have a greater impact on your credit than Chapter 13 bankruptcy will. Chapter 13 bankruptcy will remain on your credit report for 7 years after your filing date. Chapter 7 bankruptcy, however, will remain on it for 10 years afterward. Furthermore, if you file Chapter 7 bankruptcy, financial institutions will consider your inability to repay most of your debts as a mark against you. This could cause your credit score to take more of a hit.

Rebuilding your credit after bankruptcy

While filing bankruptcy will cause your credit score to take an immediate hit, you can start rebuilding it right after your case discharges. So long as you start practicing good credit habits – like using a secured credit card that you pay in full and on time each month – your score could start increasing quickly. It will take time, though, to return to its previous level. If you file Chapter 7 bankruptcy, you could start to see your credit score improve one to two years after your discharge if you practice good habits. This is likely the case, too, if you file Chapter 13 bankruptcy, though you will have to wait to rebuild your credit until after you complete your repayment plan, which takes between three to five years.

The timeline for rebuilding your credit after filing bankruptcy may seem long. But by practicing good credit habits, you could see improvements to it soon after your case discharges.