Bankruptcy isn’t a fun topic.
Depending on the type of bankruptcy, it could cost you your car or even your home, and it can sometimes prevent you from finding a new job.
Bankruptcy also leaves a huge negative mark on your credit report for up to ten years, which can significantly lower your credit score, and make it hard to get new credit.
Because of these things, there can also be an overwhelming feeling of shame and embarrassment around bankruptcy.
But the reality is that there’s nothing to be embarrassed about. Bankruptcy is a legal process and a fresh start, not a personal failing.
You’re not alone, either — there were a total of 387,721 filings in 2022 just in the US.
It would still be great if you could get the bankruptcy removed from your credit report, right?
Well, that’s not as impossible as most people assume. There are some legitimate methods for getting bankruptcies struck off your report, which I’ll explain in this article.
I’ll also provide more answers around bankruptcy:
What is it?
How long does it stay on your credit report?
How to remove them?
How can credit repair services help?
The United States courts describe bankruptcy as:
”a legal procedure for dealing with debt problems of individuals and businesses”
This is a clear and concise way of explaining bankruptcy, but let’s dive a bit deeper…
There are 6 different types of bankruptcy, but we’re going to focus on the two types most likely to apply to you — chapters 7 and 13.
Chapter 7 bankruptcy is called a “liquidation bankruptcy” and requires assets to be sold in order to pay creditors. This type is often the quickest because it requires no payment plan.
There is also a means test to qualify for a chapter 7 bankruptcy. This is because this filing allows you to have exemptions from liquidation. If this fails, your petition can be switched to a chapter 13 filing.
Chapter 13 bankruptcies — also known as the “wage earners plan” — allows the person filing to halt foreclosure to give them more time to catch up on any late payments.
This type of bankruptcy will send payments to a trustee and they will then distribute payments accordingly. A chapter 13 bankruptcy will take longer than a chapter 7 bankruptcy because debts still need to be repaid.
Although bankruptcy courts do not directly contact any of the three major credit bureaus, bankruptcies are often public records and the credit bureaus actively collect this information from the courts to maintain an accurate view of individuals credit histories.
Not only will bankruptcy negatively affect your credit score, it can also impact many other aspects of your life. This includes qualifying for new credit accounts, opening new utility accounts, or even your ability to rent an apartment.
That’s why it’s so important to consider these things before deciding if it’s the right option for you.
How long your bankruptcy stays on your credit report depends on the type of bankruptcy you’ve filed for.
A chapter 7 bankruptcy is often resolved much quicker than others. This process often takes around four to six months, because it requires you to liquidate your assets in order to repay debt. This is unlike other types of bankruptcies.
This bankruptcy will then typically stay on your credit report for 10 years from the date the bankruptcy was filed. This is mandated by federal law under the Fair Credit Reporting Act (FCRA).
A chapter 13 bankruptcy is a process of restructuring your debts, allowing you to pay off some or all of what you own over 3 to 5 years. This is a lengthier process, but gives you the opportunity to keep hold of your assets.
This type of bankruptcy stays on your credit report for a shorter period, though. In most cases, a Chapter 13 bankruptcy will be removed from your credit report seven years after the filing date.
There are a couple of reasons why Chapter 13 has a shorter reporting period:
The short answer is…YES!
The longer answer is that you can, but only if you can prove it was reported incorrectly or contains errors.
This is because bankruptcies are filed with the courts, not with the credit bureaus. And the courts don’t report these to the credit bureaus.
They end up on your credit report because the bureaus buy the information from third-parties.
This is important because these third parties often misreport information, which counts as false reporting. And false reporting is a violation of the Fair Credit Reporting Act.
Most commonly, the furnisher of information is misreported as the “Recorder of Deeds”, “Clerk of Courts”, “Magistrate”, or “Municipal Court”.
These are never actually the furnisher, making this a case of false reporting in direct violation of the Fair Credit Reporting Act. This violation makes it a valid reason to have it removed from public record.
Before you start, I’d recommend removing any outdated addresses or incorrect names from your credit reports before disputing the bankruptcy. This ensures a better match when they verify the information.
The next step is to pull together all the documents you need.
To do this, you should register for a PACER account to access your bankruptcy case information from the court records.
Then using their online request form, you should request your report from LexisNexis (you can get a free LexisNexis report once a year).
Once you’ve got both of these things, you need to compare the information on both. You’re looking for any inconsistencies between the two.
Now you know what the inconsistencies are, it’s time to get in touch with the bureaus to challenge these errors.
You need to dispute the bankruptcy record with each credit bureau (Experian, Equifax, TransUnion), following their procedures, just like disputing any other error.
If the bureaus reply to your dispute verifying the information with a "court source," you'll then need to contact the court where the bankruptcy was filed.
To do this, write a letter to the Clerk of the Court where the bankruptcy was filed (not the credit bureaus). Do not go into specifics about the dispute, just include this information:
Briefly state that a record from their court appears on your credit report.
Mention you disputed the record with the credit bureaus and they verified it with the court.
Request the procedure used by the court to verify information with credit bureaus.
Include a prepaid self-addressed envelope for their response.
The Clerk of Court will likely respond stating they do not report to the credit bureaus. This is the key evidence you need.
Forward the response to the credit bureaus by sending a copy of the Clerk's response along with a letter to each credit bureau.
In your letter to the credit bureaus, reference the disputed record and the verification they received from the court. State that you contacted the court and their response (attached) shows they don't report to credit bureaus.
You also need to point out the discrepancy in the previous verification. To make your life easier, here’s an example of what you could say:
“I have previously disputed > Insert Public Record Name / Reference # < with you and in response you verified the item as accurate stating that you have verified the information with the court. I contacted the court and their response is enclosed. It is clear they do not report to you or any credit bureau for that matter; therefore your original response verifying the item with the court was either an error or a lie. Either way, the reporting requirements do not comply with FCRA § 611 (15 U.S.C. § 1681I) and the information must be deleted immediately.”
Although you can carry out this process by yourself, credit repair services can make your life much easier.
This is because they can leverage their knowledge of Fair Credit Reporting Act (FCRA) regulations and experience navigating credit bureau disputes. These specialists can analyze your bankruptcy record for errors, handle communication with courts and bureaus, and craft compelling arguments to challenge inaccurate reporting.
By enlisting their expertise in these kinds of credit disputes, you will likely improve your chances of a successful removal, paving the way for a brighter credit future.
Yes, it is possible to rebuild your credit score, but it takes time and good financial habits.
You can't pay to remove a bankruptcy from your credit report, but you can hire a credit repair expert to help you try.
A bankruptcy will be automatically removed from your credit report after 7 years for Chapter 13 and 10 years for Chapter 7.
While removing a bankruptcy can increase your score by 30-100 points, it depends on the rest of your credit history.
Chapter 7 eliminates unsecured debt quickly, while Chapter 13 lets you keep assets by creating a repayment plan.