Bankruptcy on Your Credit Report

Bankruptcy is the most serious entry that appears on a consumer credit report, and also one of the most frequently misreported afterward.

How long it stays

• Chapter 7 — ten years from the filing date
• Chapter 13 — seven years from the filing date

Note it runs from filing, not discharge. A Chapter 13 that takes five years to complete reports for seven years from when it started, not from when it finished.

What happens to the included accounts

This is where errors cluster.

Accounts discharged in bankruptcy should be reported as included in bankruptcy with a zero balance. The debt was legally discharged; you no longer owe it.

The individual accounts still show their own history — the late payments that preceded the filing remain, on their own seven-year clocks from their own delinquency dates. So an account can disappear before the bankruptcy does, or after.

The errors to look for

After a discharge, pull all three reports and check every account that was included:

1. Balance is not zero. The single most common post-bankruptcy error. A discharged debt showing a balance owed is inaccurate, and it is a specific, documentable dispute.
2. Status still shows as past due or charged off rather than included in bankruptcy.
3. A collection appearing for a discharged debt. Collectors buying old paper sometimes do not know, or do not care, that it was discharged. Collecting on a discharged debt is a violation of the bankruptcy discharge injunction.
4. A debt that was not included showing as included, or vice versa.
5. The bankruptcy reported twice, or under the wrong chapter.
6. A Chapter 13 reported for ten years instead of seven.

Your discharge paperwork and the schedules filed with the court are the documentation. Keep them permanently.

Disputing after a discharge

The claim is precise and strong: "This account was discharged in my Chapter 7 bankruptcy, case number X, discharged on date Y. It is reported with a balance of $Z. The balance should be zero and the status should show included in bankruptcy." Enclose the discharge order and the relevant schedule page.

This is among the more straightforward disputes there is, because the court record is unambiguous.

Rebuilding afterward

The score effect of a bankruptcy is large at first and fades over the reporting period, particularly once new positive history accumulates. What works:

• A secured card, opened as soon as you can. Some issuers will approve shortly after discharge.
• A credit builder loan for installment history.
• Utilization kept low on whatever you open.
• Time, and nothing else added to the file.

Many people find they are offered credit — often poor credit, at high rates — quite soon after discharge, because a recently discharged filer cannot file again for years. Be selective. High-fee cards aimed at this moment are common.