One of the questions I am often asked by clients during consultations is; “How will filing bankruptcy affect my credit report?”
It is a good question. Here is what is supposed to happen. . .
When you file for bankruptcy and your case is successfully completed, you receive a discharge of all of your listed debts that are able to be discharged. (Your attorney can explain about the few debts that might not be discharged.) A “discharge” is essentially an injunction that prevents creditors from ever coming back to try to collect their debt. This fresh start that you are entitled to is one of the foundations of bankruptcy law.
But what actually happens on your credit report? Banks and other creditors who belong to credit reporting agencies are supposed to update those credit reports to indicate that the debt has been discharged; in other words, that the debt is no longer owed. We are all familiar with the notes on credit reports that a debt is “charged off” or “past due”. Well, these things are supposed to disappear once you get your Bankruptcy Discharge. And they usually do.
A recent article in the New York Times now says that some of the banks are ignoring these discharges and are keeping some debts alive on credit reports. While this may be true, I don’t want it to delay your considering filing for relief under the Bankruptcy Code. Here is why:
- To date, none of my clients have called me and told me this has happened to them. That means the problem, while important, is not universal. And we do lots of bankruptcy cases.
- There are remedies. I believe the local bankruptcy court would be on your side if we needed to bring an action against one of these companies for false reporting on your credit report. And the court here would consider, and I believe, award money damages to the person reporting the violation.
- The Feds are on it. The Justice Department is investigating these banks now and I believe will be able to put an end to this situation.
- The most important reason why you shouldn’t wait: because if you are contacting us, it is because you are having trouble paying your bills. And that is not going to go away quickly or easily unless you get help. So get help! Give us a call!
So don’t let this concern you. We are on your side and will protect you with our over-100 years of combined experience. With our experience, why go anywhere else?