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How Long Does Bankruptcy Stay On Your Credit Report?

Rachel Horan

Rachel Horan

May 24, 20213 minute read
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Bankruptcy can be a difficult and stressful financial situation to go through. It can also have lasting effects on your ability to access credit. As going bankrupt is recorded in your credit file, you may be wondering how long it will stay there.

On this page:

    In this article, we discuss what bankruptcy is, how long it stays on your credit report, and how it can impact your credit score.

    What is bankruptcy?

    Bankruptcy is a legal process in which you are declared unable to pay your debts to your creditors. According to the Australian Financial Security Authority (AFSA), bankruptcy can release you from some debts, give you financial relief, and a clean slate.

    Bankruptcy usually lasts three years and one day and is managed by the AFSA for individual bankruptcies. On the other hand, insolvent companies are managed by the Australian Securities Investments Commission (ASIC).

    What is the process of going bankrupt?

    If you are declared bankrupt, you are appointed a trustee that handles your affairs. According to the AFSA, when you are bankrupt, you are required to follow these obligations:

    • You must provide details of your debts, income, and assets to your trustee;
    • Your trustee notifies your creditors that you are bankrupt, which prevents them from further contacting you about your debts;
    • Your trustee can sell certain assets to cover your debts;
    • You may be required to make mandatory payments depending on your income.

    What are the consequences of bankruptcy?

    While bankruptcy can relieve you from financial distress, there are some consequences involved including:

    • A trustee is appointed to manage your bankruptcy;
    • Your income, employment, and business can be affected;
    • You may not be released from all of your debts;
    • Ability to travel overseas can be restricted as you will need to receive consent in writing;
    • Your name will permanently appear on the National Personal Insolvency Index (NPII);
    • Trustee may sell your assets to repay debts;
    • You may lose the right to take or continue legal action;
    • Your ability to obtain credit can become limited.

    Does bankruptcy affect your credit score?

    A credit score is a number that represents your reliability as a borrower. It is calculated based on the information in your credit report. A good credit score represents a trustworthy, low risk borrower, while a bad credit score can indicate the opposite.

    Bankruptcy can have a negative impact on your credit score. This is because it demonstrates to lenders you haven’t been able to effectively manage your debts in the past. As a result, bankruptcy can make you appear as a high risk borrower to lenders.

    How long does bankruptcy remain on your credit report?

    Your credit report will show your bankruptcy status for either:

    • Five years from the date you became bankrupt;
    • Two years from when the bankruptcy ended (whichever occurs later).

    If you apply for credit above a certain amount, you are required to disclose your bankruptcy to the creditor while it remains on your credit report. This can affect your chances of being approved for a loan. In some cases, lenders have policies that automatically decline applicants that are bankrupt.

    Even after you’ve been discharged from your bankruptcy, a lender could choose to look in the NPII and see your name listed. This can lead to your application for a loan or credit being declined.

    Can you improve your credit score after being bankrupt?

    There is no simple way to ‘fix’ a bad credit score. Your credit score is calculated based on the total amount of debt owed, repayment status, types of credit and new credit. This means a history of defaults, serious credit infringements, and bankruptcies can impact your credit score.

    However, there are a couple of steps you can take to help improve your credit score:

    Only apply for credit when you need it

    The total amount of debt you owe and new credit are major factors in calculating your credit rating. Additionally, the type of finance you have can impact your credit score. By ensuring you only take on credit when it is necessary and manageable minimises the risk of being unable to manage your debts. Multiple enquiries to financiers indicates that you may be in financial distress and desperate for funds, which can reflect poorly in your score.

    Applying for multiple loans in a short time can also negatively impact your score. This is because each time you apply for credit, the creditor will conduct a hard inquiry which appears on your credit report. Multiple hard inquiries in a short time frame can appear to lenders that you are in financial distress.

    Lower your credit card limit

    Lowering your credit card limit can be one way to help improve your credit score. This is because the limit of credit is shown in your credit report, not how much you actually spend. Having a higher limit can indicate to lenders that you have a higher amount of debt.


    Copyright © www.jacarandafinance.com.au Jacaranda Finance Pty Ltd ® ABN 53 162 078 195 Australian Credit Licence 456 404, Pawnbroking License Number 4221738. The information on this web-page is general information and does not take into account your objectives, financial situation or needs. Information provided on this website is general in nature and does not constitute financial advice.


    Rachel Horan
    Rachel Horan

    Written by Rachel Horan

    Rachel Horan is a Content Writer for Jacaranda Finance. Rachel has previously produced content for Brisbane City Council, Black & White Cabs, and Clubs Queensland. She has a Bachelor of Mass Communication with Distinction from the Queensland University of Technology.

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