It depends on whether you declare Chapter 7 or Chapter 13. Chapter 7 Bankruptcy will remain on your credit report for 10 years, and Chapter 13 “reorganization” bankruptcy stays for 7 years from the filing date. This is the same with all the major credit reporting agencies – Equifax, Experian, and Transunion.

Generally, personal bankruptcy is considered the worst mark possible that one could have on their credit, and therefore, for most consumers it is considered a last resort. That being said, for consumers who are buried in credit card debt and have no means of paying it off, bankruptcy may be the only debt relief option available to you, and sometimes compromising your credit makes sense to get debt collection agencies off your back and get a fresh start.

A debt discharged in bankruptcy will not erase any delinquent payment histories prior to filing, but on the bright side, any discharged or “charged off” accounts will be reported as “amount owed zero” once after bankruptcy. Also, if you declare bankruptcy and voluntarily dismiss it, both the filing and dismissal will continue to be reported for 7 to 10 years (depending on whether you claimed Chapter 7 or Chapter 13).

The Effects of Debt Consolidation

There are two types of debt consolidation: debt settlement, also known as debt negotiation, and credit & debt counseling. Of the two debts settlement tends to have a more severe impact on your credit rating, although it is not as negative as a bankruptcy. During a settlement program, your unsecured debts are reported as past due until they are negotiated and settled, at which point they will be listed as “settled for less than the full balance,” “settled in full,” and in rare instances, “paid in full” with the credit bureaus. Since the payments are considered late during this process, it has a negative effect on the payment history portion of your credit score. Fortunately, since the debts are ultimately satisfied, the amounts owed portion of your credit can improve dramatically to offset this.

The consequences of credit counseling vary depending on what the credit card company reports to the credit bureaus. Some creditors, notably Citibank, will simply report that the balance is “enrolled in a debt management plan.” Other credit card companies, notably First USA, report their card holders as past due until they’ve made 3 consecutive payments, which will most likely affect your credit negatively. Many lenders openly insist that they consider credit counseling to be on par with filing Chapter 13 Bankruptcy in terms of the credit impact, while many more view it more positively.

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