The decision to file for bankruptcy is never a simple or easy choice to make. However, many Maryland residents find that the benefits of bankruptcy offer the best available path out of unmanageable debt. Once the decision has been made to file for consumer bankruptcy, many wonder how long that choice will impact their financial standing, especially in regard to credit scoring.

For consumers who file for Chapter 7 bankruptcy, their credit reports will include that fact for 10 years. Filing for Chapter 7 requires that consumers are able to pass a means test, which is a measurement of whether or not a person has the ability to repay their debts. If the debtor can prove that he or she can repay through traditional means, then Chapter 13 offers the best fit. A Chapter 13 bankruptcy will be reported for seven years.

Regardless of which type of bankruptcy is filed, consumers have the ability to begin rebuilding their credit as soon as their case is discharged. Many credit scoring systems factor timing into the scoring rubric. In this way, debts that are currently being paid on time will rank higher than older credit matters. This allows consumers to increase their score over time by taking an aggressive stance toward the repayment of newly acquired debts.

For those in Maryland who are eager to rebuild their credit scores following a consumer bankruptcy, it may be helpful to know that achieving a solid credit ranking in the years following a bankruptcy is an attainable goal. The best way to do so is to construct a carefully researched credit repair plan, and to work toward one’s goals at a slow and steady pace. The result will be a much stronger financial foundation in the years to come.

Source: nerdwallet.com, “How to Rebuild Credit After Bankruptcy”, Erin El Issa, Dec. 17, 2014