Filing for Chapter 13 bankruptcy can have a significant impact on your credit score. While the exact effect varies depending on your financial situation before filing, it’s important to understand what happens to your credit score after completing Chapter 13.
Immediate impact on credit score
The exact decrease varies, but it can drop your score significantly, especially if it is already low. A Chapter 13 bankruptcy remains on your credit report for seven years, making it harder to obtain loans, credit cards, or rental leases during that time.
Rebuilding your credit
Your credit score won’t just go back to normal after you go through with filing and getting approval for Chapter 13 bankruptcy. Staying out of new debt, keeping credit card amounts low, and making payments on time are all parts of this plan, which usually takes three to five years.
Average credit score after Chapter 13
After Chapter 13 bankruptcy, credit scores typically fall below the national average. It’s common for credit scores to be around 579 after filing. Many people see their credit scores improve by an average of 80 points immediately after bankruptcy. You can begin rebuilding your credit about 12 to 18 months after filing, potentially seeing significant progress within three to five years.
Long-term recovery
While Chapter 13 bankruptcy initially lowers your credit score, it also provides an opportunity to rebuild your credit and financial stability. Understanding the impact of Chapter 13 bankruptcy on your credit score helps you make informed decisions and set realistic goals for your financial future.
