The purpose of this post is to provide answers to many of the most common credit reporting questions relating to bankruptcy, including (1) how bankruptcy is reported; (2) how bankruptcy or defaulted accounts affect authorized users and co-signers; (3) how accounts, including foreclosures and repossessions are reported after bankruptcy; and (4) the rules on how long bankruptcy and other credit events remain on your credit report.
A credit report is divided into 4 sections: (1) Personal Information; (2) Account History; (3) Public Records; and (4) Inquiries. This post will only discuss the public record and account history sections which are impacted by bankruptcy and related matters.
Public Record Section: Will report bankruptcies, tax liens and civil judgments. Details concerning bankruptcy, include the bankruptcy chapter, the filing date and/or the discharge date. This information will remain for the following periods:
- Chapter 7 Bankruptcy (discharged granted) – 10 years from filing.
- Chapter 7 Bankruptcy (dismissed, no discharge) – 10 years from dismissal.
- Chapter 13 Bankruptcy (discharged granted) – 7 years from filing.
- Chapter 13 Bankruptcy (case dismissed, no discharge) – 7 years from dismissal.
Special Note: Federal Law allows all types of bankruptcy to appear for 10 years (15 U.S.C. Sec. 1681c(a)(1)), but most credit reporting agencies report chapter 13 for only 7 years since a portion of the debts are paid.
Account History Section. Provides pertinent information about each credit account, including: (1) the creditor’s name; (2) account number; (3) creditor’s phone number; (4) the responsible party and your relationship to the account; (5) date the account was opened; (6) last activity; (7) high credit; and (8) the payment history on the account.
What follows is a summary of common notations that appear in relation to bankruptcy and other related events:
- Chapter 7 After Filing but Before Discharge– The creditor’s account will show “included chapter 7 bankruptcy,” this will be updated after the discharge is entered to “discharged through chapter 7 bankruptcy.”
- Chapter 7 After Discharge – the creditor’s account will show the payment history (up to the filing date), the balance owed at $0.00 and a notation that the debt was “discharged through chapter 7 bankruptcy.” The account and history will remain for 7 years from filing of bankruptcy or first delinquency (if account was not ever again brought current), whichever period is earlier.
- Reaffirmed Debt – If a debt has been reaffirmed, and not timely revoked, it can report as if no bankruptcy had been filed. Please note, however, that a creditor cannot be forced to continue to report the debt. But you can have any inaccuracies corrected and request that the debt be reported.
- Student Loans – Student loan debt is generally not discharged in the typical bankruptcy case; therefore, it will continue to report as if no bankruptcy had been filed.
- Child Support and Alimony – Child support and alimony are not dischargeable in chapter 7 and will continue to report as if no bankruptcy had been filed.
- Mortgage Debt After Chapter 7 Discharge – In North Carolina it is uncommon (and generally not advisable) to reaffirm a mortgage loan that was current on the chapter 7 filing date. Typically, a chapter 7 debtor simply continues to make voluntary payments on the discharged debt to prevent the creditor from foreclosing its collateral. Therefore, this type of debt typically shows just like any other debt included and discharged in the bankruptcy. It will not show any future payment history after the bankruptcy is filed and will reflect the balanced owed to the mortgage creditor as $0.00. The account and history will remain for 7 years from filing of bankruptcy or first delinquency (if account was not ever again brought current), whichever period is earlier.
- Foreclosure Filed after Chapter 7 Bankruptcy – If the foreclosure is filed after the filing of the bankruptcy the account should not show as “foreclosed,” since the last event concerning the account will be the bankruptcy so it will show payment history up to the filing date and will show the balance owed as $0.00. It will also have a notation that it was “discharged in bankruptcy.” The account and history will remain for 7 years from filing of bankruptcy or first delinquency (if account was not ever again brought current), whichever period is earlier.
- Repossession After Chapter 7 Bankruptcy – If the repossession occurs after the filing of the bankruptcy the account should not show as “repossession,” since the last event concerning the account will be the bankruptcy so it will show payment history through the filing date bill will reflect the balance owed as $0.00 and will contain the notation that it was “discharged in bankruptcy.” If, however, the debt was reaffirmed (and the reaffirmation was not timely revoked), the debt will show repossession and the balanced owed to the creditor after the vehicle was sold.
- Chapter 13 During Pendency of Case – Once the chapter 13 plan is confirmed the account history should reflect the reduced balance the court has determined. For example, if a car loan is “crammed down” to the value of the vehicle, the amount owned should be reduced to this lower amount. In addition, there should be a note that the account is “included in chapter 13 bankruptcy.” In addition, the creditor is not permitted to keep reporting the account as past due. Creditors should follow the above rules, although not all do. Therefore, it may be necessary to dispute or seek sanctions for the inaccurate reporting.
- Chapter 13 After Discharge – The creditor’s account will show the payment history (up to the filing date), the balance owed at $0.00 and a notation that the debt was “discharged in bankruptcy.” The account and history will remain for 7 years from filing of bankruptcy or first delinquency (if account was not ever again brought current), whichever period is earlier.
- Chapter 13 – Omitted Debts – All debts are required to be listed in a bankruptcy. However, should a creditor inadvertently be omitted (and the schedules not timely amended), the omitted account will not be discharged and will continue to be reported as if a bankruptcy had not been filed.
- Chapter 13 Mortgage on Property to be Retained – Generally long-term debt, such as mortgages, are not subject to the chapter 13 discharge when the house is being retained. In such case, the debt will continue to report after bankruptcy according to the normal rules. During the pendency of the chapter 13 bankruptcy case it will generally show “included in bankruptcy.”
Bankruptcy of Others
- Future Spouse – Getting married does not result in merged credit histories. However, if the potential spouse will also be on a future loan (such as may be the case in connection with buying a home) the credit history of the spouse will be reviewed in connection with the lender’s decision to make the loan, unless you can qualify on your own.
- Co-Signer’s Credit Report Where Co-Signer Continues Paying Debt – If the non-filing co-signer continues to pay the debt, and the account was not late, bankruptcy should have no effect on the non-filing co-signer’s credit report. It will not appear on the in connection with the co-signed account nor on the public record section.
- Co-Signer’s Credit Report Where Co-Signer Does Not Pay Debt – If the co-signer’s account is not paid by the co-signer after the bankruptcy filing a notation will be included to the effect that the debt was “charged off,” or “account closed.” It will also show the negative payment history on the account until it was closed or charged off, but it generally will not reference bankruptcy on the co-signer’s credit report. Each creditor will determine exactly how the account will be listed. If you are concerned you could have the co-signer check with the creditor and ask how the account will be reported.
- Co-Signed Account Where There Are Late Payments but Co-Signer Continues to Pay – This is subject to the normal reporting rules (late payments will remain for 7 years), but it generally will not reference bankruptcy on the co-signer’s credit report.
- Authorized Users – Authorized Users, unlike co-signers, have no personal liability on account. If an Authorized User’s credit report reflects negative payment information from the account holder, including bankruptcy, the authorized user can request that the credit reporting agency remove the negative information. Adding and Authorized User to Your Account will not “import” his or her negative information onto your credit report.
One final note: If you apply for credit or insurance of more than $150,000.00, or for a job with an annual income of $75,000.00 or more, credit reporting agencies may report bankruptcies, lawsuits, paid off tax liens, accounts sent for collection, criminal records, past due child support, or any other adverse information beyond the normal time limits. 15 USC Sec. 1681c(b)(1) – (3). In practice, however, credit reporting agencies often delete all items after 7 to 10 years.
If you have any questions not answered in this post, please feel free to contact us at (919) 875-8773.