When You Declare Bankruptcy, It Appears on Your Credit Report
Understand how bankruptcy filings are reflected on your credit report and their long-term implications for your financial profile.
When an individual files for bankruptcy, this significant financial event becomes part of the public record. Credit reporting agencies are notified, and the bankruptcy information is added to the individual’s credit report. This inclusion reflects a formal legal proceeding related to debt restructuring or discharge.
Types of Bankruptcy and Credit Reporting
Consumer bankruptcy primarily involves two common types: Chapter 7 and Chapter 13. Both are reported to credit bureaus. Chapter 7 bankruptcy involves the sale of non-exempt assets to repay creditors, with remaining eligible debts typically discharged.
Chapter 13 bankruptcy involves a reorganization of debts through a court-approved repayment plan, typically lasting three to five years. Individuals repay a portion of their debts over time from their disposable income. Upon successful completion of the plan, remaining eligible debts are discharged. Both Chapter 7 and Chapter 13 filings are distinctly noted on a credit report, indicating the specific chapter under which the bankruptcy was filed.
Duration of Bankruptcy on Your Credit Report
The duration a bankruptcy remains visible on an individual’s credit report depends on the specific type of filing. A Chapter 7 bankruptcy can stay on a credit report for up to 10 years from the date the bankruptcy case was filed.
In contrast, a Chapter 13 bankruptcy typically remains on a credit report for up to 7 years from the filing date. These timeframes are set by federal regulations. The reporting period begins from the official filing date with the bankruptcy court, not the discharge date or the date the plan concludes.
Impact on Your Credit Profile
A bankruptcy filing profoundly affects an individual’s credit profile, leading to a substantial decrease in their credit score. The precise reduction in score can vary widely, depending on the credit score an individual held before filing for bankruptcy, with higher initial scores often experiencing more significant drops. This impact is immediate and can make obtaining new credit challenging for a considerable period.
The credit report will display specific details related to the bankruptcy, often found in a dedicated “public records” section. This section typically includes the bankruptcy filing date, the discharge date (if applicable), the court where the case was filed, and the unique case number. Individual accounts that were included in the bankruptcy, such as credit cards, personal loans, or medical debts, will be updated to reflect their status as “discharged in bankruptcy” or “included in bankruptcy.” This informs potential creditors that these debts are no longer outstanding obligations. The presence of bankruptcy information on a credit report signals a higher risk to lenders, influencing their decisions regarding future credit applications.
Accessing and Reviewing Your Credit Report
Understanding how bankruptcy appears on your credit profile begins with regularly accessing and reviewing your credit report. Federal law grants consumers the right to obtain a free copy of their credit report from each of the three major credit bureaus—Equifax, Experian, and TransUnion—once every 12 months. The most direct way to access these reports is through AnnualCreditReport.com.
When navigating the website, you can request reports from each bureau individually, which involves verifying your identity with personal information and answering security questions. Review all sections of each report carefully, paying close attention to the “public records” section where bankruptcy information is listed. Additionally, confirm that all individual accounts included in the bankruptcy correctly reflect their discharged or included status. Since information can sometimes vary between the three bureaus, reviewing all three reports ensures a comprehensive understanding of your credit standing.
Disputing Inaccuracies on Your Credit Report
If you identify any inaccuracies related to your bankruptcy or other entries on your credit report, you have the right to dispute them with the credit bureaus. This process can be initiated online through the bureau’s website, by mail, or via telephone, with each method requiring specific documentation to support your claim. Common inaccuracies to dispute include an incorrect bankruptcy filing date, discharged debts still showing as active or delinquent, or accounts mistakenly identified as part of the bankruptcy.
Once a dispute is filed, the credit bureau is required to investigate the disputed information, often by contacting the original creditor or “furnisher” of the data. This investigation typically concludes within 30 to 45 days. Maintain a record of all communications, including dates, names of representatives, and copies of submitted documents, throughout the dispute process. If the investigation confirms an inaccuracy, the credit bureau must correct or remove the erroneous information from your report.