After your discharge from the Chapter 13 Bankruptcy, there will remain accounts. These accounts were current prior to the bankruptcy filing, for a period of up to 7 years. This will result in a potentially negative impact on your credit score.
The average credit score one to two years after a bankruptcy filing is 571 — 29 points lower than two to three months after. Additionally, the average utilization ratio spikes to 46.7%. The average credit card balance is $2,038 — an increase of 376.2% over two to three months after filing.
Like any other bankruptcy filing, Chapter 13 affects credit. However, after Chapter 13, credit scores often rebound more quickly than if you'd filed for Chapter 7, partly because filers repay creditors through a Chapter 13 plan.
Paying off a loan typically doesn't cause your credit score to drop. In fact, it often has a positive effect on your credit score because it demonstrates responsible financial behavior and reduces your overall debt.
It's possible that you could see your credit scores drop after fulfilling your payment obligations on a loan or credit card debt. Paying off debt might lower your credit scores if removing the debt affects certain factors like your credit mix, the length of your credit history or your credit utilization ratio.
A FICO® Score of 650 places you within a population of consumers whose credit may be seen as Fair. Your 650 FICO® Score is lower than the average U.S. credit score. Statistically speaking, 28% of consumers with credit scores in the Fair range are likely to become seriously delinquent in the future.
A Chapter 13 discharge is a formal document signed by the bankruptcy judge that says you've successfully met the terms of your repayment plan. It means that any remaining balances on your qualified debt are forgiven, and it's a red-light-full-stop for creditors trying to collect debts.
Paying the debts early promptly, utilizing not more than 50% of the credit, and make sure you do not miss or default on any payments. If this process is carried out for 12 months, a bankruptcy filer can attain a score of 700 within 12 months of discharge.
VantageScore and FICO scores range from 300 to 850, making 300 the lowest credit score possible. While credit scores as low as 300 are possible, most consumers have scores above 700. A low credit score will prevent you from borrowing money or even renting an apartment.
There is no limit on how much you can owe and still qualify for Chapter 7 bankruptcy. In fact, the more you owe, the more likely it is that you need bankruptcy relief.
Chapter 7 Bankruptcy Waiting Periods
Once the case is discharged, lenders will enforce a waiting period, otherwise known as a “seasoning period,” for those hoping to apply for a mortgage after bankruptcy. Waiting periods include: Four years for a conventional loan. Three years for a USDA loan.
Once the 7 or 10 years pass and the bankruptcy filing is removed from your credit report, your credit score will increase by 50 to 150 points. The ultimate increase in your credit score will also depend on the presence of other negative information in your credit report.
How to Remove Canceled Debt From Your Credit Report. In general, you can't get discharged debt removed from your credit report unless the information is inaccurate. In that case, you have the right to file a dispute with the credit reporting agencies.
Additionally, an absolute discharge will result in no criminal conviction on the offender's record, but the discharge will appear on their record for one year. A conditional discharge can result in a three-year-long probationary period and can also appear on their record for up to three years.
100% Plans – if you are in a 100% plan, meaning you will be paying back ALL of your creditors in full through your plan, you CAN pay off your case early by making more payments, but make sure your case is a 100% plan before doing so.
Chapter 13 bankruptcy is typically removed from your credit report seven years after the date you filed, and this is done automatically.
Because a Chapter 13 bankruptcy offers some hope that lenders will receive payment, future creditors sometimes consider it more desirable or as having less impact on your credit. So, a Chapter 13 could be better for you than a Chapter 7.
Chapter 13 Discharge Clears Qualified Debts
Congratulations, you've spent years slowly repaying your debts and the plan is now complete. The judge issues the discharge and now any remaining balances on your qualified debts are forgiven. Chapter 13 bankruptcy allows for more qualified debts than Chapter 7.
You don't have to pay unsecured debts in full. Instead, you pay all your disposable income toward the debt during your three-year or five-year repayment plan. The unsecured creditors must receive as much as they would have if you'd filed Chapter 7.
TYPE OF DISCHARGE: Soldiers separated under this program will generally be given either an honorable discharge or a general under honorable conditions discharge (Para. 13-10, AR 635-200).
Even better, just over 1 in 5 people (21.2%) have an exceptional FICO credit score of 800 or above, all but guaranteeing access to the best products and interest rates.
While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.
The minimum credit score for conventional loans is typically 620, making a 650 score highly viable: High likelihood of approval with favorable terms. Access to a wider range of conventional loan products. Potentially lower interest rates compared to those with scores in the 620-640 range.