Chapter 13 bankruptcy is a legal proceeding in which a federal court reorganizes your outstanding debts, allowing you to repay your creditors over a long period of time, ranging from three to five years. Although filing for Chapter 13 protection helps you get your finances in order, it severely damages your credit score. However, the credit rating impact from Chapter 13 doesn't last forever.
Expiration
Chapter 13 bankruptcy will drop off your credit report seven years after the court approves your debt repayment plan. Your credit score will improve once the Chapter 13 notation finally disappears from your credit report, because agencies will no longer factor it in to calculate your credit score.
Lessening Effect Over Time
Your credit score will gradually improve in the time after you filed for Chapter 13 bankruptcy, even before it drops off your credit report. This is because Fair Isaac Corporation---the corporation that designed the consumer reporting agencies' credit scoring programs---places a higher importance on recent accounts. As time passes since your bankruptcy, it becomes much less relevant to your credit score and your score will rise as a result.
Credit Repair Practices
In addition to sticking to your Chapter 13 repayment plan, taking proactive steps to rebuild your credit will help improve your score. For instance, getting a secured credit card, which is a line of credit backed by a deposit, can help raise your credit score if you use it for smaller purchases and pay off the balance in full each month. You can get such a card while still undergoing the Chapter 13 repayment process.
Time Frame
The actual time frame in which your credit score returns to the "good credit" range varies on several factors, most notably how well you pay your bills and establish positive credit history after filing for Chapter 13. Simply waiting for your bankruptcy to expire will not provide enough of a positive effect to raise your score in a timely manner. However, with both responsible financial management and credit repair tactics, you can have a score of 750---considered "excellent credit"---before the Chapter 13 bankruptcy falls off your credit report, reports Justin Harelik, a columnist for Bankrate, a personal financial management website.
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