Credit Reporting and Bankruptcy

Credit Reporting and BankruptcyMany debtors considering a bankruptcy filing are worried the impact on their credit rating and about how long the bankruptcy filing will affect their credit. The Fair Credit Report Action, Section 605, prohibits credit agencies from including a bankruptcy on a person’s credit report more than 10 years after the bankruptcy was filed. If you’re concerned about the impact of a bankruptcy filing on your creditworthiness, this is good news. Remember, though, that a bankruptcy filing is a public record kept in electronic storage format, and is accessible to potential employers or lenders. You still want to disclose a bankruptcy filing, if asked.

Because Chapter 7 and Chapter 13 petitions will both affect your credit score, one is not necessarily better than the other. Potential creditors typically look at other factors as well, and a Chapter 13 reorganization may be interpreted as a good faith effort to repay your debt, even if it was the only option available. Whether you opt for liquidation under Chapter 7 or reorganization under Chapter 13, you will generally be more attractive to a potential lender when you come out of bankruptcy, as your debt load should be lower.

Determining whether a bankruptcy filing is the best option for you and your family is a difficult balancing act. You’ll have the immediate, but short term, benefit of the protection of the automatic stay, which can take a lot of pressure off you and allow you to get your affairs in order. However, there can be some long-term consequences, particularly with respect to your creditworthiness. That’s one of the reasons you want a knowledgeable attorney to guide you through your decision-making process. If you are considering bankruptcy and concerned about post discharge credit options, do not hesitate to contact the office today for your free initial consultation.