A credit report put on the table together with credit cards, pen, plane, and calculator | Roemerman Law

If you, like millions of other Americans each year, are facing mounting bills and spiraling debt, filing for bankruptcy may help you get back on your feet financially. Moving ahead with bankruptcy, however, is not an easy decision. Even though bankruptcy may genuinely be life-changing—in a positive way—you should also consider the consequences it may have on your credit.

To this end, it is highly advisable that you speak with an experienced bankruptcy professional who can talk you through your options and address any concerns you may have. If you are considering filing for bankruptcy, our friendly legal team at Roemerman Law is here to review your case in confidence, explore your options, and explain how they can assist you in navigating the bankruptcy process in New York.

Credit Reports

One of the main tools that potential lenders and other parties may use to assess an applicant’s creditworthiness is that person’s credit report. Put simply, a credit report is a detailed breakdown of an individual’s credit history. Credit reports are prepared by a credit bureau after collecting various financial information about a person. The three major credit bureaus are Equifax, TransUnion, and Experian.

A credit report includes standard personal information such as name, address, social security number, date of birth, etc. Credit reports generally also contain details on someone’s credit history, including credit accounts loans, late payments, and recent inquiries, as well as various public records, including bankruptcies .

Practically speaking, your bankruptcy filing will include all sorts of bills and outstanding payments that you were struggling with before filing, such as outstanding credit card payments, medical bills, and more. Those accounts will also be listed on your credit reports, while accounts discharged in bankruptcy will be reported as “discharged” or “included in bankruptcy” with a zero balance. Even though you will effectively owe $0 for them, these amounts will still appear on your reports, so when you apply for credit, lenders will be able to see them. Of course, they will no longer be marked as “unpaid” or “past due”, hence they should not be considered financial burdens as such.

The information contained in your credit report is used to generate a credit score, which is another aspect that will be considered in terms of determining your creditworthiness. Your credit score is a “snapshot” of your credit risk at a particular time, with each credit reporting agency likely offering a different number to consumers.

The most widely used credit score is the so-called “FICO score“, which ranges from 300 to 850, with a higher score denoting a lower credit risk. Ironically, it is possible that the healthier your credit was before the bankruptcy, the more adversely it might be affected in comparison to that of a person who had poor credit to begin with.

How Long Will My Bankruptcy Stay on My Credit Report?

While bankruptcy may help relieve your debt obligations, it is also likely to affect your credit. Therefore, when filing for bankruptcy, you should be prepared for the fact that it will remain in your credit report for years, depending on the Chapter under which you filed.

It must also be noted that bankruptcy courts have no interaction with credit bureaus and do not provide information to them: credit reporting companies collect information regarding bankruptcy cases from the bankruptcy courts’ public records. Therefore, irrespective of the actual status of your case (open, closed, discharged, dismissed, etc.) they may still report it on your credit report for up to 10 years.

The Fair Credit Reporting Act regulates credit reporting companies. According to the Act, credit bureaus may not report a bankruptcy case on a person’s credit report after 10 years from the date the bankruptcy case is filed or discharged. In practice, a Chapter 7 bankruptcy will generally appear on your reports for 10 years from the date you file, whereas a discharged Chapter 13 bankruptcy normally stays on your reports for 7 years from the date you file, although it could remain for up to 10 years if you don’t meet certain conditions.

Accordingly, given that your credit score is based on the information contained in your credit reports, both types of bankruptcy will also impact your score until it is removed from your credit report. Therefore, getting new credit is likely to become harder for 7-10 years from the date you file for bankruptcy.

Even so, there is absolutely no reason to stress over this prospect, as your credit will gradually rebound after filing, provided you take the right steps to rebuild it—and you may be pleasantly surprised to find out that your credit score may not be as bad as you thought after filing for bankruptcy.

Once filers proactively work at improving their credit score, they often find that they have a higher credit score about a year after bankruptcy, thanks to the beneficial effects of bankruptcy. Chances are that your credit score was already pretty low before filing, so bankruptcy should offer you exactly the kind of “clean slate” you need to restore your credit almost immediately after filing. Rebuilding your credit will certainly not happen instantaneously, and getting there might be more of a marathon than a sprint race, but this should not discourage you from deciding to file for bankruptcy if you determine that this would be a good option for your particular situation.

Knowing Your Rights

While bankruptcy is a matter of public record  and, as such, part of your credit report, your credit report itself is not a public record. Therefore, it is up to you to decide who can have access to it. For example, you may wish to grant access to a bank or a prospective or current landlord. This may be the case if you are applying for a credit card or are looking into extending an existing lease or renting a new property. You may also wish to grant access to an insurance company or telecommunications provider to purchase insurance or a cell phone service—but it is by no means something that is freely accessible by everyone.

A special note must be made concerning employers, who may inform you that they wish to run a credit check, and thus look at your credit report. This will grant them access to information that may be used to make employment decisions about you. Based on the applicable legislation, you decide whether you wish to share with your current or potential employer information relating to your credit, including a bankruptcy filing. Furthermore, there are rules in place precluding all kinds of bankruptcy discrimination in employment  solely because of a bankruptcy filing, insolvency, or failure to pay a debt [1].

In New York City, specific legislation prohibits most employers from even learning about bankruptcies during a pre-employee background screening [2]. Under the New York City Human Rights Law Credit Check Law, as amended by the Stop Credit Discrimination in Employment Act [3], most employers may not run a credit check on you or hire another company to perform one: if you are asked to sign a document so they can check your credit, they may be breaking the law. Similarly, most employers may not use consumer reporting agencies or third-party companies, services, and websites to examine your credit history, so they can’t make inquiries about your payment history or creditworthiness, credit standing, or how much credit you have.

Lastly, even if you do authorize certain persons to have access to your credit report, the report itself does not include a copy of your bankruptcy petition as such. Certain information, such as your debt accounts, creditor information, and payment history, will appear there. Granting someone access to your credit report, however, does not give them a full overview of your bankruptcy case.

Removing Bankruptcy from Your Credit Report

Legally speaking, your bankruptcy is due to stay on your record for 7 to 10 years, depending on the chapter under which you filed. After this time, the bankruptcy public record will automatically be deleted, and future creditors won’t be able to see it.

While waiting for the bankruptcy record to clear, you should work on rebuilding your credit. Make sure you follow your repayment plans (if applicable), and certainly avoid amassing more debt.

You should also make a list of the debts included in your bankruptcy, and cross-check them on your credit reports every few months or so for errors. Make sure that the negative marks are removed in a timely fashion, while keeping in mind that it might take about two months for the accounts to be updated after a discharge.

Your credit score will be adversely affected if negative, incorrect information on your credit report goes uncorrected. Given that bankruptcy courts have no control over credit bureaus, it is up to you to check your credit reports regularly and contact credit bureaus directly to discuss information on your credit report. Request a free investigation of information in your file that is untrue, misreported, disproved, or inaccurate. As a consumer, you are entitled to one free credit report every twelve months from each of the three major credit reporting agencies, while you may need to pay a fee if you wish to keep track of them more often.

A bankruptcy discharge may be removed from public records if you prove that it has been misreported. To do so, you will need to successfully challenge any error you find on your credit history or bankruptcy filings. These will have to be removed if the credit bureau or reporting agency can’t prove that they are legitimate. Doing so, however, involves taking several necessary steps and following a set procedure, which you would be much better placed to pursue with the assistance of a credit repair attorney, as it is a rather complicated and time-consuming process.

Contact Roemerman Law

The information in a credit report and your credit score are not the only factors that a prospective lender may take into consideration when determining whether to offer you credit and on what terms. Bankruptcy affects credit in various ways, partly because of the different elements that comprise each person’s credit.

If you are considering filing for bankruptcy and are wondering how it may affect your credit, contact Roemerman Law today for a free initial consultation or to learn about qualifying for bankruptcy in New York. We are committed to offering clear and easy-to-understand cost estimates, so let our experienced team review your particulars in absolute confidence and help you make an informed choice!


[1] As covered by Section 525 of the Bankruptcy Code: https://usbankruptcycode.org/chapter-5-creditors-the-debtor-and-the-estate/subchapter-ii-debtors-duties-and-benefits/section-525-protection-against-discriminatory-treatment/

[2] https://www1.nyc.gov/site/cchr/media/credit-check-law-for-employees.page

[3] https://legistar.council.nyc.gov/LegislationDetail.aspx?ID=1709692&GUID=61CC4810-E9ED-4F16-A765-FD1D190CEE6C&Options=ID%7cText%7c&Search=0261

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