When you file bankruptcy and receive a discharge of your debts (meaning they are wiped out), certain information about your bankruptcy and discharged debts may continue to appear on your credit report. This article explains what information should -- and should not -- show up on your credit report after you receive a bankruptcy discharge, and what you can do if your credit report contains the wrong information.
(For more information on credit reports, visit our Credit Repair area.)
The Fair Credit Reporting Act
The FCRA requires consumer reporting agencies (also called credit bureaus) to maintain an accurate file of your credit information. Creditors who report your information to the consumer reporting agencies (CRAs) must also be truthful and accurate. The FCRA tells CRAs and your creditors the type of information they can report, and for how long that information can legally show up on your credit report. If they do not report accurate or truthful credit information about you, you can dispute that information or take other action if you are harmed by their violations of the FCRA.
How Discharged Debts Should Be Reported
The fact that you filed for bankruptcy can be reported for up to ten years. While it may seem like negative information, the reporting of your bankruptcy discharge might not necessarily be a bad thing. A bankruptcy discharge can “clean up” debts that used to show up on your credit report as being delinquent. That is because debts that were discharged can no longer be reported as being unpaid or in a past due status.
CRAs and your creditors should report each discharged debt as:
- having a zero balance, and
- discharged, “included in bankruptcy,” or similar language.
While the FCRA does not directly address how individual discharged debts must be reported, to report a discharged debt as something else (for example, "charged off" or having a balance as more than zero) would violate the provision of the FCRA that requires furnishers (that is, creditors or collectors that report to the credit reporting agencies) from reporting incorrect information. 15 USC 1681s-2(a)(1)(A). It is also a violation of the FCRA if the debtor notifies the creditor about the incorrect reporting, but the creditor does not correct and update it. 15 USC 1681s-2(a)(2)(b).
Finally, if a creditor willfully refuses to report a debt as discharged in bankruptcy in an effort to induce the debtor to pay the discharged debt, this may violate the bankruptcy discharge injuction (The discharge injunction prohibits a creditor or collector from continuing with collection efforts once the bankruptcy court has entered the final discharge.)
What Cannot Be Reported
However, if your creditor does not correct the status of your discharged debt, or if the CRA does not maintain an accurate report of your post-bankruptcy credit information, your credit may be unnecessarily damaged. When you discharge a debt in bankruptcy, a creditor cannot report that debt as:
- currently owed or active
- late or delinquent or outstanding
- charged off
- having a balance due, or
- converted as a new type of debt (re-aged, or having new account numbers, for example).
When your discharged debts are reported in this way, your credit rating could suffer, you could be denied credit, or be required to pay a discharged, but misreported, debt as a condition for getting a new loan. For this reason, it is important that your credit report show an accurate listing of your post-discharge information.
When Creditors Don't Update Information for Your Credit Report
Unfortunately, some creditors do not update the information it reports to the credit reporting agencies, so that your report might still say that a debt was "charged off" or something similar. State and federal officials, and consumer advocates, believe that some banks and creditors do this on purpose as a way to get you to pay up, even though you no longer legally owe the debt. There are a few lawsuits addressing this issue that are wending their way through the courts.
How to Make Sure Your Credit Report Is Accurate Post-Bankruptcy
Within 30 to 60 days after receiving your bankruptcy discharge, request an updated credit report from each of the three major CRAs: TransUnion, Equifax, and Experioan. Thoroughly review each listed debt for accuracy. Also watch out for unfamiliar creditor names or debts, as they may actually be discharged debts that were bought and sold to a third party, but are not accurately reflected as having been discharged.
(To learn how to get your credit reports, see Getting Your Free Credit Report.)
If Your Discharged Debt is Misreported
If a CRA or creditor misreports a discharged debt, you can dispute it using the FCRA dispute procedure. To learn how to do this, see How to Dispute Errors on Your Credit Report.
In addition, if a creditor wrongfully reports your discharged debts, it may also be in violation of the bankruptcy discharge injunction, which prohibits creditors from trying to collect on discharged debts.
If you take steps to remedy the misreporting, and the creditor (or collector or debt buyer) refuses to fix the error, talk to a bankruptcy attorney.