What Are the Different Types of Bankruptcy and How Is Each Considered by My FICO® Score?

A bankruptcy will always be considered a very negative event by your FICO Score. How much of an impact it will have on your score will depend on your entire credit profile. There are a few types of bankruptcies and how long they stay on your credit report is different.

Someone that had spotless credit and a very high FICO Score could expect a huge drop in their score. On the other hand, someone with many negative items already listed on their credit report might only see a modest drop in their score. Another thing to note is that the more accounts included in the bankruptcy filing, the more of an impact on your score.

As long as the bankruptcy is listed on your credit report, it will be factored into your score. However, as time passes, the negative impact of the bankruptcy will lessen. Typically, here is how long you can expect bankruptcies to remain on your credit report (from the date filed):

  • Chapter 7 and 11 bankruptcies up to 10 years.

Chapter 7 bankruptcy is often called "liquidation" bankruptcy as it discharges most unsecured debt including personal loans and credit cards. When filing Chapter 7 bankruptcy, you can keep most of your assets and the process takes about 3-4 months.

Chapter 11 bankruptcies are filed usually by large businesses.

  • Chapter 13 bankruptcies up to 7 years.

Chapter 13 bankruptcy is more a "reorganization" option in which you set up a repayment plan to pay back creditors over a specific period of time. Property liquidation is not required with Chapter 13, however, you'll need regular income in order to make your payments and it could take 3-5 years for the final settlement of this type of filing.

Keep in mind that these dates refer to the public record item associated with filing for bankruptcy. All of the individual accounts included in the bankruptcy should be removed from your credit report after 7 years.

Deciding to declare bankruptcy is a hard decision, but there is a community of people who have gone through it. Check out the myFICO Forums to discuss your situation.