We have often been asked what impact a bankruptcy has on credit and how long it stays on the credit report. In a previous blog post we pointed to a NY Federal Reserve study that showed that a bankruptcy actually sped up the return of decent credit for those who need it. But the question remains. So here is the answer:
Under federal law (15 U.S. Code § 1681c) a consumer credit reporting agency is not permitted to report a bankruptcy for more than 10 years from the date of filing (if filed by the debtor and not by a creditor. We are informed some will remove it after 7 years for Chapter 13 bankruptcies that are successfully completed.
Most debts included in a bankruptcy must be removed after 7 years from the date the debt went to collections. Once the statute of limitations for the debt has expired, even if in less than 7 years, the debt must be removed. Paid tax liens must be removed 7 years after payment.
New Jersey residents can get a free annual credit report from www.annualcreditreport.com. This site has a lot of important information.
We encourage our clients who have gotten a discharge to check their credit report a month or two later to make sure that all the debts which were discharged are listed at a zero balance. (the debt stays on the report for 7 years but getting a zero balance report helps your credit score). If this is not on the report we recommend writing to each agency (addresses and contacts on annualcreditreport website), demanding a correction. The letter should be send certified mail and attach a copy of the discharge and schedule F.
There is a lot of information available about credit scores. See About credit scores
The most important thing, however, is to be proactive about your debt problems. We always start from your situation, and help you understand your budget and alternatives, so you can develop the plan that works best for you.