Credit History After Bankruptcy: What You Need to Know

Bankruptcy is a word that scares many people. However, for an individual, it is a legal mechanism for getting relief from unaffordable debts and an opportunity to gradually restore financial stability. There is, however, one “scar” that remains — a record in your credit history. I often hear the question: can you realistically expect to get a loan after going through such a procedure? How many years will you have to wait? Let’s look at what happens to your financial reputation after personal bankruptcy and how to rebuild it properly.

In short: the fact of bankruptcy is recorded in your credit history and remains there for years. When people talk about the consequences of personal bankruptcy, they primarily mean this record in the individual’s credit history. Information about the opening of bankruptcy proceedings, recognition of a person as bankrupt and closure of the case may be transferred to credit bureaus in accordance with the law and the established procedures for information exchange. For many creditors, such information is an indicator of increased credit risk.

But it is important to understand: bankruptcy does not prevent you from taking out loans in the future. Your credit record is not blocked — it simply contains a note stating that the “debt was discharged due to bankruptcy”, which automatically puts you in a less favourable position in the eyes of most creditors for several years.

In addition to the note in your credit file, there are other significant consequences of bankruptcy that you should know about in advance:

1. A drop in your credit rating. Your credit rating falls to very low levels, and even after 10 years it does not automatically recover — you need to build a new positive credit history.
2. A five-year obligation to disclose the bankruptcy. For five years after being declared bankrupt, an individual is required to disclose this fact in writing before entering into loan agreements, credit agreements, surety agreements or collateral agreements. Concealing this fact may create legal risks and negatively affect your relationship with the creditor.
3. Public disclosure. Information about the case becomes public, and court decisions are published in the Unified State Register of Court Decisions. This information is available to financial institutions.
4. Risk of losing property. During bankruptcy proceedings, the debtor’s property may be included in the liquidation estate, except for property that cannot be seized under the law.

I always advise those who are considering taking this step to choose professionals carefully. When looking for the best bankruptcy firms, it is easy to come across those who promise to “write off everything in two months” but in reality do not properly handle restructuring or the sale of assets. Look at real cases, not advertising promises.

Many people wonder how long their credit history is stored after a loan has been fully repaid or after going through bankruptcy proceedings. This is fairly clearly regulated by law. According to the Law of Ukraine “On the Organisation of Formation and Circulation of Credit Histories”, information in a credit history is stored for 10 years from the date the relevant obligation ends.

In other words, the countdown starts not from the date the loan was taken out, but from the moment it is fully repaid or otherwise legally terminated. In the case of bankruptcy proceedings, the period for storing the information is generally calculated from the date the relevant obligations are terminated in accordance with the procedure established by law.

So, if you are wondering how long a credit history is stored, remember: even after debts have been discharged or all settlements have been completed, the information does not disappear immediately. Records remain in credit bureau databases for another ten years and may be taken into account by banks and other financial institutions when assessing new loan applications.

Many people wonder when their credit history is updated. Banks, microfinance organisations and other creditors regularly provide information to credit bureaus within the timeframes and according to the procedures established by law and their information exchange agreements.

After bankruptcy proceedings are completed, information about the closure of debts will appear in your credit file after the first data update cycle. However, the fact that you were declared bankrupt does not disappear until the 10-year retention period expires. Therefore, it is impossible to simply remove this note — you can only add new positive records to your credit history.

Technically, yes. In the first few years after bankruptcy, obtaining a new loan is usually more difficult because most creditors consider such borrowers to be higher-risk customers. Here are several realistic ways to rebuild your credit history:

• A credit card with a minimum limit. Some banks may consider setting a small credit limit if you have a confirmed income and demonstrate positive financial behaviour after completing the bankruptcy procedure.
• A secured loan. If you are willing to provide liquid assets as collateral (such as a car or deposit), your chances may increase.
• Microfinance organisations. They are generally more willing to work with higher-risk borrowers, but their interest rates can reach hundreds of percent per year — I recommend approaching this option with caution.

I see three main steps to rebuilding your credit history:

1. Clear all overdue debts. Even a small overdue payment after bankruptcy can work against you. If any debts were not included in the discharge, repay them as quickly as possible.
2. Create a new positive track record. This is a classic way to rebuild your credit history: take out a small consumer loan (UAH 1,000–5,000) or get a credit card, use it without exceeding the grace period and make payments on time. Six to 12 months of flawless payments can be enough to add fresh positive information to your credit file.
3. Avoid frequent applications. Every new credit application is recorded. If you submit dozens of applications, it may look like a desperate attempt to obtain money and only worsen the impression you make on lenders.
   

People often confuse debt discharge with removing a record from their credit history. When is a debt considered repaid after bankruptcy? After the bankruptcy procedure is completed, immediately — the court makes a decision releasing the person from their debts. However, the record in the credit history, as mentioned above, will remain for 10 years. So a person becomes financially free immediately, but their “reputation” is restored only a decade later.

Monitoring the information held about you is the best way to avoid unpleasant financial surprises. It is important to understand that neither Unex Bank nor other financial institutions create separate credit histories for their customers. All information about loans, limits and payment discipline is submitted to credit bureaus, where a single credit file for the borrower is formed. There is no separate history within one particular bank, as all data is integrated into the overall credit profile.

You can check your credit history in several ways:

• through the UBKI website (ubki.ua) or the bureau’s mobile app. A credit report is provided free of charge once a year;
• through the NBU Credit Register, although it is not a complete equivalent of a credit bureau report.

If you find an error, you have the right to submit a request to the bureau. The bureau will investigate it and inform you of the outcome within the timeframe established by law. In cases of serious violations, you can contact the NBU. By the way, you can read more about how to avoid choosing unfavourable loan terms and getting into a new debt trap in the article “Money Without Overpayments: How 0% Loans Work and What Makes Them Different”. It contains useful information for those learning how to live without debt.

After bankruptcy, your credit history will indeed take a hit, and rebuilding the trust of banks will take years. But this procedure is the only legal way to get rid of debts that cannot be repaid. If you act gradually — clear overdue debts, start with small loans and manage them flawlessly — you can gradually regain your status as a reliable borrower. The main thing to remember is that a credit history is not permanent, and rebuilding your credit history is entirely possible.

Translation into English was created with the help of artificial intelligence.