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How Does Chapter 13 Bankruptcy Affect Your Credit in Phoenix?

By Phoenix Bankruptcy Attorney on April 28, 2025

For many Phoenix residents, Chapter 13 bankruptcy offers a much-needed path to regain control over overwhelming debt. But a common concern remains: Will my credit be permanently ruined? The answer is no.

While your score will probably drop after filing for Chapter 13 bankruptcy, it will get better over time. In fact, it could begin to improve within 12 to 18 months of filing.

Chapter 13 Bankruptcy and Credit Reporting

Unlike Chapter 7, which liquidates certain assets, Chapter 13 allows you to restructure your debt and repay it over a 3- to 5-year plan. This form of bankruptcy is often chosen by individuals who have a steady income and want to retain assets like their home or car.

When you file Chapter 13, it will appear on your credit report and stay there for seven years from the filing date. This might seem alarming, but keep in mind that missed payments, defaults, and collections can also hurt your score—and stay on your report for up to seven years as well. Bankruptcy could actually be your best option if you’ve been struggling with consistent negative marks.

The Immediate Impact on Your Credit Score

The first thing to understand is that your credit score is likely to drop after you file, especially if your score was in the high range. But for many people filing for Chapter 13, their credit has already taken a hit due to missed payments, charge-offs, or maxed-out credit cards.

So how bad is it?

  • A typical filer may see a drop of 100 to 200 points after filing.
  • The actual drop depends on your existing credit profile.
  • The higher your score at the time of filing, the more noticeable the decline.

While this drop is significant, it’s not permanent. In fact, many people start seeing credit score improvements within 12 to 18 months of filing, especially as they begin making regular plan payments and eliminating debt.

Chapter 13 and Long-Term Credit Health

Believe it or not, there are several credit-related benefits to filing Chapter 13, particularly when compared to the alternative: falling deeper into delinquency or default.

Key benefits of Chapter 13 include:

  • Consolidation of debt into manageable payments
    Instead of juggling multiple late accounts, you have one structured payment to the bankruptcy trustee.
  • Stoppage of collection efforts
    Your credit report stops accumulating new collections, judgments, or liens once you file.
  • Demonstration of repayment
    Chapter 13 shows that you made the effort to repay your debts—something creditors may view more favorably than a full discharge under Chapter 7.
  • Preservation of property
    Unlike Chapter 7, you typically keep your home and vehicle, which can help maintain your financial stability and creditworthiness over time.

If managed correctly, Chapter 13 can act as a springboard for improving your credit, especially if your finances were already in a tailspin.

Rebuilding Credit After Bankruptcy

While Chapter 13 remains on your credit report for seven years, you don’t have to wait that long to start rebuilding. In fact, creditors often view post-bankruptcy filers as “less risky” once their debt burden has been reduced or structured.

Here’s how to start rebuilding credit in Phoenix after your bankruptcy:

Make All Chapter 13 Payments On Time

Your repayment plan is your chance to prove reliability. Timely payments help re-establish a positive payment history, which is one of the biggest factors in your credit score.

Open a Secured Credit Card

Secured cards require a cash deposit and help you build credit responsibly. Use it for small purchases and pay the balance in full each month to avoid interest.

Monitor Your Credit Report

Review your credit reports regularly to ensure discharged debts are marked correctly and no errors are dragging your score down. You can get free reports from AnnualCreditReport.com.

Consider a Credit-Builder Loan

Many Phoenix-area credit unions and community banks offer small loans specifically designed to help rebuild credit. These can be a great next step once you’ve shown consistency with your repayment plan.

Keep Credit Utilization Low

Once you have access to revolving credit again, keep your balances under 30% of the limit. High balances—even if paid—can hurt your score.

Life After Chapter 13

You might be surprised by how quickly you can get back on your feet. Many people who successfully complete Chapter 13 find that:

  • They can qualify for car loans within a year or two—sometimes sooner with a down payment.
  • Mortgage eligibility may return within 2-4 years, especially with FHA or VA programs.
  • Credit card offers start appearing again, often with higher interest rates at first, but they improve with responsible use.

When Bankruptcy Is the Right Move

Filing for bankruptcy isn’t for everyone, but in many cases, it’s the most responsible decision you can make. If you’re buried under debt and unable to catch up on payments, your credit is likely to suffer regardless.

Bankruptcy gives you the legal breathing room to reorganize, protect your assets, and work toward a sustainable future. At Hilltop Law Firm, we’ve helped countless clients in Phoenix file for Chapter 13 and move forward with renewed confidence.

Reasons to Choose Hilltop Law Firm

Cy Hainey at Hilltop Law Firm is a bankruptcy attorney who’s been helping people in Phoenix get debt relief for over a decade.

If you’re interested in a free Zoom meeting, someone from the Hilltop Law Firm office will be happy to help you set up your virtual meeting in advance.

We’re not here to judge—we’re here to help.

We’ll work with you to:

  • Determine if Chapter 13 is right for your situation
  • Create a repayment plan that works with your income
  • Help you protect your home, vehicle, and other key assets
  • Provide guidance on how to rebuild your credit over time

Talk to a Trusted Phoenix Bankruptcy Lawyer Today

If you’re facing mounting debt and worried about your credit, don’t wait for things to get worse. The sooner you act, the sooner you can take control of your future.

Call Hilltop Law Firm at (602) 466-9631 to schedule your free consultation with a Phoenix Chapter 13 bankruptcy attorney today.

Posted in: Bankruptcy

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