Many people in California find bankruptcy a potentially appealing option, but they are worried about the long-term effects on their credit scores. After all, Chapter 7 bankruptcies remain on a person’s credit report for 10 years while Chapter 13 bankruptcies, with payment plans and debt restructuring, persist for 7 years. Indeed, bankruptcy can damage a person’s credit report significantly. However, at the same time, it is important to note that most people who are considering bankruptcy are already suffering from bad credit that makes it difficult to obtain credit cards, mortgages or loans.

Most people turn to bankruptcy only after they have been struggling for some time with overwhelming debt. They may have unpaid bills, collection calls or even judgments over their medical bills, credit card debt or outstanding loans. Therefore, some people who file for bankruptcy may see an improvement in their credit scores even immediately after the filing due to the elimination of a substantial amount of negative debt. While bankruptcy items remain on a credit report for some time, bad credit items can also persist for seven years. Therefore, bankruptcy can offer a mechanism for people to seek debt relief and change their relationship with finances.

People can improve their credit score after bankruptcy by working to rebuild their credit. Secured credit cards, small bank loans and other options can help people to establish a positive credit history with a record of on-time payment. As bankruptcies age over the years, their impact becomes less important in comparison to newer, positive items that show a good payment history.

Rebuilding credit is part of emerging successfully from the bankruptcy process. An attorney may provide advice on Chapter 7 and Chapter 13 bankruptcy and work with people struggling with insurmountable debt to find a solution that can help change their financial future.