Filing for a Chapter 7 or 13 Bankruptcy is a great way to start over and free yourself from overwhelming debt. A question I often receive is how does the discharged debt appear on my credit report after the bankruptcy court has officially granted me a discharge. This article will explain what information should and should not appear on your credit report once your debt has been discharged through bankruptcy.
The Fair Credit Reporting Act.
The Fair Credit Reporting Act, or FCRA, is the act that controls how creditors, buyers of credit, and credit reporting agencies may report debt. This act was enacted to ensure creditors and the like maintain accurate information regarding a person’s credit information. Creditors are required to truthfully and accurately report information to consumer reporting agencies.
Further, the FCRA tells the credit reporting agencies what type of information they can report, and the length of time the information can stay on a credit report. If one of these agencies does not report the information truthfully and accurately, the debtor can dispute the information and take further steps to halt these violations of the FCRA.
How Discharged Debts are supposed to be reported on your credit reports.
Unfortunately, the FCRA does not directly instruct credit reporting agencies how to report discharged debts. There is not a strict set of rules on how the discharged debt must be listed. Instead, the act states that an agency cannot misreport information, such as listing the debt as having a balance more than zero. The FCRA also requires the creditor to update incorrect reporting once the debtor notifies the creditor. See 15 USC 1681s-2(a)(2)(b) for more information. If a creditor refuses to report a debt as discharged in bankruptcy in order to induce a debtor to pay the debt, this may be a violation of the bankruptcy court’s discharge injunction.
A bankruptcy can be listed on a person’s credit report for up to 10 years. A bankruptcy listed on a credit report can have both positive and negative implications. The bankruptcy will usually lower a debtor’s credit score. However, a bankruptcy can be seen in a positive light in that a discharge will erase all delinquent debts on a credit report. This means debts that appeared as unpaid or past due, will now be listed as discharged. A bankruptcy will also allow a person to slowly build up their credit score and get the rest of his or her finances in order.
What a Credit Reporting Agency is not allowed to report.
A credit-reporting agency cannot report a debt that is discharged in bankruptcy as:
- Currently owed or active;
- Late or delinquent;
- Charged off;
- Having a balance due; or
- Converted as a new type of debt (such as a debt with a new account number).
A discharged debt that is reported in any of these ways could cause significant damage to a person’s credit report. This could lead to a debtor being denied credit or being required to pay a discharged debt off as a condition for receiving a loan. It is imperative for a credit report to be accurate.
How to make sure your credit report is accurate after filing for bankruptcy.
A person who files for bankruptcy should request an updated credit report within 60 days of receiving a bankruptcy discharge. Request a report from the three major credit-reporting agencies (Transunion, Experian, and Equifax). Review each debt listed on the report and look out for any unfamiliar creditor names or debts. These unfamiliar debts could actually be the discharged debts that were bought and sold to a third party. If so, these debts need to be listed as being discharged through bankruptcy. If a creditor or a credit reporting agency has misreported a discharged debt, a debtor may dispute it through the FCRA dispute procedure.
If you have received a bankruptcy discharge in Florida and are having issues with your credit reports misstating your debts, it may be time to contact the Law Office of David Goldman PLLC at 904-985-1200.