How Long Does It Take to Recover from Bankruptcy

There is no fixed duration to recover completely from bankruptcy. How long you take to recover depends on taking the right financial decisions, and reducing the time to rebuild your credit to improve your credit scores.

The first step, of course, is to take the hard decision of filing for bankruptcy. Although filing is a difficult step to take, the real impact of bankruptcy is felt after the filing process is complete, and the slow and challenging period of recovery starts. But once you are done with the required legal procedures and get discharged of all debts legally, you have a chance to make a fresh start with a clean slate. 

Recovering from Bankruptcy

The impact of bankruptcy can follow you up to a maximum period of 10 years. This is because your credit reports can show your bankruptcy status for a maximum of 10 years. But there is a possibility of recovering from bankruptcy much earlier than that by taking good measures to rebuild your credit and improving your credit score. The recovery process can begin as soon as you get discharged of bankruptcy from the court and you have a chance to start afresh. After that happens, your skills and your determination to recover from bankruptcy will be the key factors to decide how long you take to recover completely from bankruptcy. The better your credit scores are, and the more the time gap is since the day of your discharge, the better are your chances of obtaining money from the creditors to start your new business ventures. 

Legally speaking, the two types of bankruptcy that you can file for are Chapter 7 and Chapter 13 bankruptcy. 

Chapter 7 Bankruptcy 
The credit reports show your bankruptcy status up to a period of 10 years after the discharge. Chapter 7 is the more common type of bankruptcy filed. It involves liquidation of the borrower's non-exempt property to pay off the debts to his creditors, after which the court may discharge the borrower of all his debts. The court procedures usually take around 70-75 days. 

Chapter 13 Bankruptcy 
The credit reports show the bankruptcy status up to 7 years after the discharge. If a person does not want to put his valuable assets like house or car under risk, he can file for Chapter 13 bankruptcy, if he fulfills the required eligibility criteria. In this type of bankruptcy, the borrower makes an offer to pay off the debt over a period of 5 years, by submitting a payment schedule to the court. The court procedures usually take around 40-50 days. 

Measures to Recover From Bankruptcy

For a quick and safe recovery from bankruptcy, you would need to take sound financial decisions that enable you to improve your credit score at a fast pace. Here are some measures that you can take to recover from bankruptcy:

➤ Check your Credit Reports 
After filing for bankruptcy and getting discharged from your debts, obtain your credit reports from the credit report agencies, and make sure all the information mentioned is correct and up-to-date. In case of any discrepancies, get it rectified immediately to avoid any inconvenience in the future. 

➤ Timely Bill Payments 
Timely payment is of utmost importance if you want to get out of your bankruptcy troubles. Your record of bill payments amounts to 35% of your credit scores. So pay all your bills before or on time, and set your credit score high. 

➤ Plan and Improvise 
Sit back and plan your expenses, and make changes in your spending habits. Make a list of expenses that are essential like food, shelter, insurance, and child care, and do away with whatever you can. Plan your expenditure for the month in advance based on your income and savings. 

➤ Build Financial Security 
Make short term and long term financial goals for yourself. Have good control over your expenditure, and avoid spending on things that are not essential. You may also plan to open an emergency savings fund for yourself. To keep your earnings consistent, take up another job and use that money for your emergency savings fund. 

➤ Getting New Credit 
Apply for a secured credit card by depositing the required money, and make sure to use only a small amount of your credit limit. Ensure timely payment of your credit card bills. This would further improve your credit score and create a good impression on your potential lenders. You would need a credit score of at least 600 or more to better your chances of acquiring credit from the lenders at a good rate of interest. 

Although your credit report would reflect your status for 7 to 10 years, over time your bankruptcy status would keep losing its impact on the creditors. What would remain is your will and your skill to get yourself out of this difficult situation, and take control of the future. By keeping good control over your spending, managing your credit sensibly, and by paying off your bills timely, you can improve your credit score and recover from bankruptcy in a much shorter span of time.