How is Credit Reported During a Bankruptcy?
The Fair Credit Reporting Act (FCRA) mandates that the credit bureaus correct errors within 30 days of notification. However, creditors are not required to make any reports on your credit while you are going through the bankruptcy process, which could be anywhere from a few months for a Chapter 7 to 5 years on Chapter 13 case. When making payments under Chapter 13, many creditors will not report this activity for fear of violating the automatic stay that is put in place when a debtor petitions for bankruptcy. This stay prevents a creditor from taking any further action to collect debts – and some take this a step further to include reporting of debts. The preference is to wait until the debt is either paid in full, or discharged. Another reason why it isn’t done during the bankruptcy process is because a debtor may not complete their bankruptcy requirements. This means debts will not be discharged and will remain enforceable.
For most people, their credit report is totally irrelevant to their life during a bankruptcy and immediately following the discharge. Those seeking a Chapter 7 Bankruptcy would be unable to take on any new debt prior to filing and during the process. Those seeking Chapter 13 Bankruptcy are only able to take on debt in the form of a refinanced mortgage. This would be taken care of by the lender with knowledge of a current Chapter 13 petition.
Under the FCRA, United States residents are entitled to one free copy of their credit report every 12 months from each of the three major credit bureaus: Experian, Equifax and Transunion. It is advised that you request and check that your report is accurate once the discharge process has been completed to make sure everything was reported correctly. Once a debt has been discharged at the completion of the bankruptcy process, the debt must be reduced to zero. If creditors do not report your discharge, they may be in breach of FCRA. If a debt is still showing up on your credit report after it was discharged, send a copy of the discharge papers to the creditor and/or collection agency with a note requesting it be changed to a zero balance as part of your Bankruptcy discharge.