If you are considering filing for bankruptcy or if you have recently done so, you may be wondering what kind of an impact the process will have on your credit score. It is important to note that, in the case of bankruptcy, impact is determined by the length of time the bankruptcy will remain on your credit, not on the number of points by which your score will be reduced. Many factors, such as the amount of your debt and the way in which the bankruptcy takes care of it, play into the number of points lost, but it is fairly easy to know how long the bankruptcy will remain on your credit report. This is simply determined by the type of bankruptcy for which you filed.

If you filed for a Chapter 7 Bankruptcy, the most common type of bankruptcy in the United States and also known as liquidation, then you can expect this to impact your credit for a period of ten years. With Chapter 13 Bankruptcy, another common option, the impact on your credit report will only be for seven years. The reason that Chapter 7 Bankruptcy remains for a longer period of time is because with this type of bankruptcy, you do not pay your debts off out of your own pocket. Instead, your debts are paid off by the seizing and eventual selling of your assets. With Chapter 13 Bankruptcy, you still pay off your debts, but you do so under the rules and regulations of a court approved bankruptcy plan.

You should know, however, that it is completely possible to rebuild your credit after the bankruptcy proceedings are complete. Up front, of course, you will likely have some difficulty securing credit cards, loans, housing, banking accounts, and in some rare cases, employment. However, if you are willing to start small and work your way up, you can repair your credit. This may require you to take out credit cards with small limits or with lesser known companies or to work with high interest financing companies that specialize in assisting those with poor credit or with a bankruptcy history on their record. If you pay these off in a timely manner, however, your credit score will slowly begin to go up, and this will allow you to get better types of credit in the future. Additionally, maintaining a consistent employment and housing record can also help to improve your credit score and present you with better financial opportunities.

Bankruptcy can be a wonderful way to regain your financial independence and to get back on your feet after debt has knocked you down. Unfortunately, this solution does not come without some consequences, but if you are willing to deal with them and take the steps to correct them, then you can still benefit from filing for bankruptcy.