Removing a Bankruptcy From Your Credit Report

Although there are certain advantages to filing for bankruptcy, such as getting rid of burdensome debts, there is a downside. A bankruptcy filing, which is public record, will be picked up by the major credit reporting agencies, significantly impacting a debtor’s credit score.

A bankruptcy filing raises a red flag to potential lenders and will affect future lending opportunities. It will likely prevent an individual from obtaining credit for a considerable period of time after filing. Even when a debtor is able to obtain credit, the associated interest rate will be exorbitant. For those with a filing listed on their credit report, it’s important to take measures to have it removed as soon as possible – if and when there is a legitimate reason to do so.

You Cannot Remove a Legitimate Bankruptcy

A common misconception is that a legitimate bankruptcy can be removed from a credit report before the time allowed by law, which is usually 7 or 10 years depending the chapter. There are numerous so-called credit repair companies advertising that they can get bankruptcies and other negative credit items removed from a credit report for a fee. However, according to the Federal Trade Commission (FTC), it is not possible to remove accurate negative information from a credit report. Nevertheless, as discussed below, there are ways to reduce the duration that a filing is reported. There are also options to remove a bankruptcy filing if an error is involved or if the debtor was the victim of identity theft.

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It Is up to the Debtor to Confirm Removal

Under the Fair Credit Reporting Act, a bankruptcy filing can remain on an individual’s credit report for 10 years. Credit reporting agencies are required to remove the bankruptcy from the credit report no later than 10 years from the date it was filed. However, it is important to follow up and make sure these agencies remove the bankruptcy on time. The three major credit reporting agencies are Experian, Equifax, and TransUnion.

Removal under Chapter 13

It may be possible to have a bankruptcy removed from a credit report as early as 7 years from the filing date if it was under Chapter 13. Under Chapter 13, the debtor repays his or her creditors over an extended period of time, usually 3 to 5 years, in accordance with an established repayment plan. Although credit reporting agencies are not legally obligated to remove a bankruptcy after only 7 years (as opposed to the 10 years required by law), they do so to encourage debtors to file Chapter 13. This is because unlike with Chapter 7 wherein debts are discharged, with Chapter 13, creditors are repaid.

Another Option: Vacate the Bankruptcy Case

In some cases, an individual files for bankruptcy but later finds that it’s unnecessary because he or she is able to work out the problem that prompted the filing in the first place. For example, a person facing foreclosure files bankruptcy to buy time to reinstate their mortgage.

Once the problem is solved, the bankruptcy is no longer necessary and even though the individual withdraws the case, it still appears on their credit report. In this case, one should ask the bankruptcy court to vacate the bankruptcy, which essentially treats the bankruptcy case like it was never filed. Once vacated, it may be possible to have the bankruptcy removed from public record and credit reports.

If not removed, credit reporting agencies should be contacted and the dispute process should be initiated. If an agency refuses to remove a bankruptcy, a debtor has the right to add a statement onto their credit report explaining the situation.

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Errors in a Report – Take Action to Correct Them

If a bankruptcy filing appears with errors, immediate action should be taken to have it removed. Errors may include clerical mistakes such as a miss-transposed Social Security number, or misrepresentations due to identity theft or mistaken identity. Any case of inaccuracy on a credit report should be reported to the agency immediately; and in the case of identity theft, an additional fraud alert should be placed on the report.

Case Studies: Removing a Bankruptcy From Your Credit Report

Case Study 1: Confirming Removal of Bankruptcy

In this case, Sarah filed for Chapter 7 bankruptcy due to overwhelming debt. After the required 10 years, the bankruptcy should be automatically removed from her credit report. However, Sarah wants to ensure that it is removed promptly. She follows up with the three major credit reporting agencies, Experian, Equifax, and TransUnion, to confirm that the bankruptcy has been removed as per the legal requirement.

Case Study 2: Early Removal for Chapter 13 Bankruptcy

John filed for Chapter 13 bankruptcy to repay his creditors over a specified period. He completed his repayment plan within 7 years instead of the usual 3 to 5 years.

Although the credit reporting agencies are not legally obligated to remove the bankruptcy until the 10-year mark, John contacts them to request early removal based on his successful completion of the repayment plan. The agencies recognize his effort and agree to remove the bankruptcy from his credit report after 7 years.

Case Study 3: Vacating an Unnecessary Bankruptcy Filing

In this case, Emma faced potential foreclosure and filed for bankruptcy to gain more time to resolve the issue. However, she managed to resolve the problem outside of bankruptcy and no longer needed the filing. Emma asks the bankruptcy court to vacate the bankruptcy, treating it as if it was never filed. Once the bankruptcy is vacated, Emma takes the necessary steps to have it removed from public records and her credit report.

Case Study 4: Correcting Errors and Identity Theft

James discovers that his credit report shows a bankruptcy filing that does not belong to him. He suspects identity theft or mistaken identity. James takes immediate action and reports the error to the credit reporting agency, providing evidence of the discrepancy.

Additionally, he places a fraud alert on his credit report to protect against further fraudulent activity. The credit reporting agency investigates the issue and removes the erroneous bankruptcy filing from James’s credit report.

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