People considering filing bankruptcy and individuals who have
filed bankruptcy have many questions about the effect of bankruptcy on their
credit report. The overall effect of the bankruptcy on an individual's
credit depends on a number of factors, such as the other items that are
reported on the credit report, and the individual or agency who is reviewing
the report.
After a bankruptcy case is filed it is
reported on an individual's credit report (just as other public records are
reported such as lawsuits and tax liens). The Federal Fair Credit Reporting Act Section 605(a)(1) provides that the bankruptcy must be removed
from the credit report ten years after the date the case was filed. This
remains true for Chapter 7 cases; however, the credit reporting companies have
made a practice of removing Chapter 13 cases from individual's credit reports
after 7 years. The credit bureaus have said that this differing treatment
is due to the fact that a Chapter 13 is a reorganization plan, and the debtors
may be paying back some of their debt. (In reality in the majority of
Chapter 13 cases individuals are not paying back unsecured debts).
After a bankruptcy discharge is received
the balances on the debts that have been discharged should be changed to zero
(showing that nothing is owing on these debts). While any negative
entries, such as late payments, will remain on the credit report until the time
has passed for negative entries to fall off the credit report (that is
typically 7 years from the date of the entry).
It is possible
with diligent effort to rebuild one's credit score after a bankruptcy is filed. Even within the 7 year period where the bankruptcy remains on the credit
report.
No comments:
Post a Comment