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How Bankruptcy Affects Your Credit Score (and How to Bounce Back)

The Debt Hotline | September 19, 2025

Summary: Filing bankruptcy may actually improve your credit score if you're already behind on payments. Most people see their scores recover to the 600s within one to two years and can reach the 700s within two to three years post-filing. Solo can help you respond to debt lawsuits, and Upsolve offers free Chapter 7 bankruptcy filing assistance.

Are you worried about how bankruptcy will destroy your credit? You might be surprised to learn that for most people, filing bankruptcy actually helps their credit score rather than hurting it. In a recent episode of , Ben Jackson, co-founder of Upsolve, shared both his personal bankruptcy experience and insights from helping over 18,000 people file Chapter 7 bankruptcy for free.

Ben's story is particularly compelling because he went from $60,000 in credit card debt and driving for Uber and Lyft to owning a home and building a successful nonprofit all within about 10 years of filing bankruptcy at age 29.


Most people considering bankruptcy already have damaged credit scores

By the time someone reaches the point of filing bankruptcy, their credit has usually already taken a significant hit. The average Upsolve user carries about $36,000 in debt and typically has a credit score in the mid to low 500s due to missed payments and high credit utilization.

"Usually by the time you reach that point, your credit's already kind of in the toilet," Ben explains. When you're struggling to keep up with minimum payments on massive debt loads, late payments and maxed-out credit cards have likely already damaged your score.

This means that for most people, filing bankruptcy actually starts the financial recovery process instead of causing additional credit damage.

Filing bankruptcy can immediately improve your credit score

After you file bankruptcy, something interesting happens: the consumer debt that's been dragging down your credit score gets removed from your credit report. This can create an immediate boost to your score, especially if you've been carrying high balances or have multiple accounts in collections.

Ben experienced this firsthand, though his situation was slightly different from most filers. Because he had been working so hard to stay current on his payments, his credit score was still around 710 when he filed. His score dropped to about 650 initially, but within a year and a half, it was back in the 700s.

Even in Ben's case, where he started with good credit, recovery happened quickly through strategic credit-building activities.

Credit recovery happens faster than most people expect

The timeline for credit recovery after bankruptcy is much shorter than most people think. For typical Upsolve users who start with damaged credit, filing bankruptcy often provides an immediate improvement. Within one to two years, most people see their scores climb into the low to mid 600s, and within two to three years, many reach the 700s.

Ben achieved his credit score recovery through several proven strategies:

  • Getting secured credit cards
  • Using rent reporting services to add positive payment history
  • Utilizing credit monitoring and dispute programs
  • Maintaining consistent, on-time payments

The key is that once the overwhelming debt burden is removed, you can focus on rebuilding rather than constantly falling behind.

Bankruptcy won't prevent you from major future purchases

One of the biggest fears people have about bankruptcy is that it will permanently prevent them from achieving financial goals like buying a home or going to school. Ben shared these same concerns before filing.

Within a few years of filing bankruptcy, Ben was able to:

  • Get student loans to attend law school
  • Qualify for a mortgage at standard rates
  • Build the financial foundation for his current success

Ben's experience demonstrates that while bankruptcy appears on your credit report, lenders are often willing to work with people who have successfully completed the bankruptcy process and are rebuilding their credit responsibly.

The bankruptcy notation stays on your credit report for up to 10 years, but its impact on your ability to get credit diminishes significantly over time, especially as you rebuild positive payment history.

Chapter 7 and Chapter 13 bankruptcy serve different purposes

Not all bankruptcy options affect your credit the same way. Understanding the difference between Chapter 7 and Chapter 13 can help you make the right choice for your situation and credit recovery goals.

Chapter 7 bankruptcy wipes out unsecured debt like credit cards and personal loans entirely, giving you a "fresh start." This typically leads to faster credit recovery because you're not carrying any remaining debt from the bankruptcy.

Chapter 13 bankruptcy sets up a repayment plan where you pay a portion of your debts over three to five years. While this might seem more responsible, it means you're still carrying debt and making payments for years, which can slow your credit recovery.

Ben almost made the mistake of filing Chapter 13 with an attorney who only handled that type of bankruptcy. "I was to the point of signing on a retainer agreement with them to pay them three grand to basically never get out of debt," he recalls. Discovering Chapter 7 saved him from years of additional payments and helped him achieve faster credit recovery.

However, everyone's situation is different. Chapter 13 might be the right choice if you have assets you want to protect or income that disqualifies you from Chapter 7. Tools like Upsolve's screening process can help determine which option fits your circumstances.

Filing bankruptcy is more straightforward than most people think

Ben's filing experience, while chaotic due to his DIY approach across multiple states, revealed an important truth: the bankruptcy system is designed to help people, not punish them.

"I thought I was going to go to court and they were going to be like, how dare you come in here with the wrong forms?" Ben remembers. "It was amazing how helpful the court clerks were in helping me walk through that scary process and how helpful the judges were."

This is where Upsolve makes a significant difference. Rather than spending months gathering paperwork and risking mistakes, Upsolve's TurboTax-style workflow guides you through the process in a couple of hours. The platform has helped over 18,000 people file successfully with forms that court clerks often compliment for their completeness and accuracy.

Take action to protect your financial future

Whether you're facing a debt lawsuit or considering bankruptcy, taking action early gives you the most options for protecting your credit and financial future.

If you're being sued for debt, filing an Answer is crucial to prevent a default judgment that could make your situation worse. Solo helps you respond properly to debt lawsuits and can connect you with collectors through SoloSettle to negotiate favorable settlements without going to court.

For those considering bankruptcy, Upsolve offers a free two-minute screening tool to determine if Chapter 7 is right for your situation. If you qualify, their platform walks you through the entire filing process at no cost. If your case is more complex, they can connect you with attorneys in their network for additional guidance.

Remember, bankruptcy is a legal tool designed to give people a fresh start when debt becomes unmanageable. It’s not a personal or moral failure. And as Ben's story shows, the credit impact is temporary, but the financial freedom can be life-changing.

Respond to debt collection lawsuits fast with Solo.

Connect with Ben Jackson and Upsolve

To learn more about Ben Jackson's work and access Upsolve's free bankruptcy filing tools, visit upsolve.org. Upsolve is a nonprofit organization dedicated to helping people access the bankruptcy system without the high cost of attorney fees.

To listen to the rest of the conversation with Ben Jackson about bankruptcy, credit recovery, and real listener questions about specific bankruptcy scenarios, check out the full episode of The Debt Hotline on your favorite podcast platform.

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