Credit scores seriously suffer when individuals file for bankruptcy, and there’s no easy fix

Filing for Chapter 7 bankruptcy can be complex

Debtors must know whether their liabilities are secured or unsecured and what type of assets they have. They also need to know what a filing can and can’t help them with.

For some debtors without assets that can be sold or returned, filing for bankruptcy can provide a path toward a clean slate

However, the bankruptcy process does not apply to several types of common debt, including money owed toward child support or alimony payments. Most debtors also do not qualify for relief from student loan payments.

Some people make too much money to file for Chapter 7 bankruptcy

Chapter 7 is the most popular type of filing for individuals needing relief. However, to be eligible, debtors must pass an income means test. At the most basic level, they must prove that their average monthly income over six months is below their state’s median. But there are exceptions.

Bankruptcy is a legal way to manage overwhelming debt, whether for individuals, corporations, or even local governments

Chapter 7 is for liquidating personal assets to clear debts, Chapter 13 allows a repayment plan for individuals, and Chapter 11 lets businesses reorganize to stay afloat.

Every year, nearly 500,000 bankruptcies are filed in the US

From personal hardships to major corporate collapses like Enron and Bed Bath & Beyond, filing for bankruptcy isn't a quick fix or a “get-out-of-jail-free” card—it’s a complex, structured process offering debt relief or repayment options.

Take a bankruptcy self-filing quiz

If a debtor is considering filing for Chapter 7 bankruptcy, it may be tempting to take a do-it-yourself approach to avoid attorney or preparer fees. However, experts caution that this could come back to bite filers. A quiz can help would-be filers explore whether their cases are complex enough to necessitate a lawyer.

Brush up on your bankruptcy vocab

The technical term for what happens when a court removes a debtor’s obligation to repay money owed is “discharge.” An “automatic stay” is what goes into place once a filing occurs to prevent a debtor from facing lawsuits, evictions, and other negative consequences until the process wraps up.

Chapter 7 and Chapter 11 filings can impact common stockholders

Publicly traded companies don’t file for bankruptcy out of nowhere—there are typically warning signs in a stock’s performance, quarterly earnings calls, and US Securities and Exchange Commission filings.

Calculate: Do you need to file for bankruptcy?

About 77% of American households had some debt at the end of 2023. However, when debt becomes crushing, it's time to consider a management plan or a bankruptcy filing. This calculator helps explore whether debt is manageable based on inputs like medical debt, payday loans, and gross annual income.

The history of bankruptcy in the US dates back to the signing of the Constitution

In 1787, this founding document gave Congress the right to establish nationwide bankruptcy laws. Legislators took advantage of that power in 1800 when they passed the Bankruptcy Act of 1800, the first comprehensive bankruptcy law at the federal level.

The first steps to rebuilding your credit score include getting to know exactly what's on your credit report and figuring out how far you are from the '700 club,' or 'good score' range.

Why consumers could soon see the impact of buy now, pay later loans on their FICO credit scores

FICO rolled out its first-ever BNPL-specific credit scoring models in June 2025. While missed installments can now negatively impact a credit score, there's also the potential for on-time BNPL installment payments to help boost scores.

One in five Americans has an error on their credit report, according to the Federal Trade Commission

In 2026, four US senators sent letters to two of the nation's major credit bureaus (TransUnion and Experian) after an investigation revealed that they were fixing fewer errors on consumers' credit reports.

Privacy concerns in the credit scoring system

Because credit scores use a lot of personal information (such as whether or not someone makes credit card payments on time), some worry their privacy is being compromised in the data collection process.

Consequences of a bad credit score

A bad credit score can lead to spending roughly $100K more on a typical mortgage. Poor scores also prevent you from getting certain jobs, apartments, and more, hindering you from building wealth in the long term.

US consumers collectively owe more than $1T to credit card companies—almost as much as they owe in auto loans.

Five primary factors determine your credit score

Your credit history is used to calculate your credit score. It includes information such as how often you miss payments (on credit cards, for instance), the types of financial accounts you hold, how long you’ve held those accounts, and more.

A credit card’s grace period is a minimum of 21 days

Under federal law in the United States, an individual’s credit card payment due date must fall on the same day of each month, at least 21 days after the cardholder’s statement closing date.

The three major credit bureaus were created in the mid-1900s to sort local credit reporting into national databases

In the 1800s, credit bureaus went into business to help lenders make decisions. But today's three major credit bureaus, Experian, Equifax, and TransUnion, didn't become the industry leaders they are today until the 20th century, around the same time FICO was founded.

In 2025, the 'two strikes and you're out' rule took effect to protect consumers from repeated attempts to withdraw money

After years of being delayed by litigation, a 2024 US Supreme Court ruling upheld a law that prevents lenders from attempting to take payments from accounts with insufficient funds more than twice without reauthorization. This tactic is commonly used by payday loan companies, which technically require repayment on the day borrowers receive their paychecks.

Managing too many credit cards can be costly if they have annual fees

However, canceling cards must be strategic if it becomes necessary, as it can negatively impact your credit score. Before canceling, experts suggest asking if it's possible to downgrade to a no-annual-fee version in order to keep the account open, thus preventing potential hits to your credit score.

A study followed a cohort of Black graduates beginning in the 1995–96 school year

While access to higher education led to improved outcomes across minority groups in the US, a significant gap exists in the average amount of debt held and the time it takes to pay back loans. This study found median Black borrowers still owed 95% of the principal two decades later.

Why private credit has faced challenges in recent years

The factors that some experts say are driving what could be private credit's most challenging era since the 2008 financial crisis include global economic uncertainty around trade and tariffs, investor fears about the amount of money being spent on artificial intelligence, and more.

Watch what happens if you commit tax evasion, from phone calls to property seizure

Tax Day is one of the most dreaded days for working Americans. The IRS responds differently to late filings and late payments. If you don't file at all, the IRS might freeze your assets.

A star investment banker was fired, launching a decade-long court fight

Star bankers are the core of an investment banking firm's business, so when Perella Weinberg let their restructuring guru Mike Kramer go in 2015, he sued, launching a ten-year legal fight.

Workers need 40 ‘credits’ to qualify for Social Security retirement benefits

Forty credits are equal to about 10 years of full-time work. If someone has never worked, they won’t be eligible for benefits on their own, but they could qualify via a spouse, ex-spouse, or dependent.

In most cases, if you withdraw your money from an IRA before you turn 59½ years old, you'll face a hefty 10% penalty

However, there are a few exceptions to this rule. In the case of adoption, death, terminal illness, education, homebuying, and more, you can access your funds without a strike against you. A chart outlines the different exceptions to this rule, plus the accounts to which they apply.

See a ranking of the best (and worst) Federal Reserve Chairs since 1914 out of the 16 men and women who have held the office since.

Despite being favored by 87% of Americans, Congress does not have term limits.

About 12.5% of US adults experience a phobia in their lifetime, a diagnosis that hinges on the intense fear interfering with daily life and persisting for at least six months.

Play the role of a student in a game where you try to navigate college and remain debt-free, selecting different income levels, high school experience, race, ethnicity, and more.

The American Society of Civil Engineers' infrastructure report card gave the US a C in 2025, its highest grade since the project launched in 1998.

The United States has had a tumultuous relationship with Cuba since its 1959 revolution, highlighted by a nuclear crisis and a decades-long trade embargo.

Learn how to read a prospectus, the juicy document that any company must file with the SEC before going public.

View the ten deadliest tornadoes in US history.

In 2026, Finland was named the world's happiest country for the ninth consecutive year based on its wealth, social safety network, and high life expectancy, among other factors.

Dozens of S&P 500 stocks, including Coca-Cola and Walmart—known as the dividend aristocrats—have increased dividends every year for 25 years

To reduce wrinkles in clothing, research recommends gentle wash cycles with more water and tumble drying with smaller loads and longer times.

As of 2025, the most cited papers in science include a review of graphene, methods to improve image recognition, streamlining electron density calculations, and optimizing protein studies.

Frank Lloyd Wright's houses are historically hard to sell because they're old, subject to local landmark commissions, and often unfashionable

Urushiol, the oily toxin in poison ivy, can remain allergenic on clothing for years.

Some renewable energy sources may weaken the resiliency of electric grids by removing outage buffers provided by coal- and natural gas-fired plants, which provide the system with more time to find a new power source if a plant goes down.

In 1939, baseball star Lou Gehrig delivered his inspirational 'Luckiest Man' speech after retiring due to the health condition that now bears his name.

Ebola infects and disables immune cells, triggering a cascade of events that leads to small blood clots throughout the body, weakening blood vessels and interrupting blood flow to key organs.

Domino's Pizza's 30-minute delivery guarantee was responsible for the chain's 1980s surge, but it was discontinued after the company was found liable for delivery driver accidents.

The Brothers Grimm were lawyers before they were storytellers, and became interested in fairy tales as they began investigating how rules and customs had been passed down through cultures.

Scientists can determine Earth's past climate conditions by analyzing air trapped in microscopic bubbles within ice cores—columns of compressed snow layers that build up over hundreds of thousands of years.

According to the physics of black holes, our 4D reality may be a hologram—a projection of information coded on a 2D surface on the edge of the universe.

See 33 images that became central to huge scandals, including a young Charles and Camilla, Michael Jackson's baby on a hotel balcony, and Hugh Grant's mugshot.

One disco producer saw 'Star Wars' four times on its opening weekend and was so inspired that he recorded the album 'Star Wars and Other Intergalactic Funk,' which produced a chart-topping single.