How You Can Keep Your Credit Score From Plummeting After A Bankruptcy

Clients always ask about the effect a bankruptcy will have on their credit report. The Bankruptcy Court nor the BK Trustee have absolutely nothing to do with credit reporting agencies. Private corporations like Equifax and Experian report the data. However, federal law still governs how long these agencies can maintain a public record of your bankruptcy. In some cases, the court may provide remedies for creditors and debt collectors who misuse your credit report post-bankruptcy.

What Kind Of Bankruptcy Is Right For You

Chapter 7 bankruptcies allow you to discharges your debts after you liquidate any non-exempt assets. The discharge means you no longer have any obligation to pay the debts. However, your debts will show on your credit report for a while after the BK.

A discharged debt can remain on your credit report for up to seven years under the Fair Credit Reporting Act. The BK will be reported for up to 10 years after the discharge.

Chapter 13 bankruptcies work a little differently. In Chapter 13 BK cases, the court does not immediately discharge your debts. Instead, you must submit a plan to repay your debts over a period of 3 to 5 years. Your outstanding debts will not be discharged until the completion of the repayment plan.

A Chapter 13 BK remains on your record for 7 years. However, some debts may actually stay on your credit report longer. 

Always Check Your Credit Reports Before and After A Bankruptcy Case

It is a good idea to check your credit report before and after filing a BK. By law, the three major credit reporting agencies must provide one free copy of your report each year. In some cases, you may notice outstanding debts no longer appear on your credit report even before your BK is complete. This is because unpaid debts automatically fall off your credit report after seven years. The only exception to this is if the creditor has obtained a civil judgment against you. So if you have not paid a credit card balance in 7 years, that debt will no longer appear on your credit report.

Credit reports also contain a list of anyone who has “pulled” your information in the past 6 months. Debt collectors are not allowed to pull your credit report after your bankruptcy has been discharged. It is illegal for any debt collector to harass you once you file for bankruptcy.

Bankruptcy will negatively affect your credit in the short term. You can plan on experiencing a 200 point drop in your credit score for filing BK. However, keeping debt collectors in check after filing will keep your score from falling further.