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How to Remove A Bankruptcy From Your Credit Report

If you are one of the half million people a year who file for bankruptcy, you’re probably trying to figure out when and how you can get that bankruptcy removed from your credit report. While bankruptcy filings bucked the trend and actually decreased by 29.7% last year (from 775k in 2019 to 544K in 2020), a half a million filings indicate that there are a lot of people still struggling.

If you’re trying to better understand how long bankruptcy will stay on your credit report and how to remove bankruptcy from your credit report, we’ve got you covered. We’ll walk you through the specifics..

How Long Does a Bankruptcy Stay On Your Credit Report?

How long a bankruptcy stays on your credit report depends on which bankruptcy filing you opted for in the first place. 

  • Chapter 7 bankruptcy can remain on your credit report for 10 years
  • Chapter 13 bankruptcy stays on your credit report for 7 years 

Chapter 13 bankruptcy leaves your credit report sooner because it involves a plan where you pay your debt to a trustee over a set time period. Chapter 7, on the other hand, means that you liquidate your assets, pay what you can, and get rid of what’s called dischargeable debts..

Dischargeable debts include such things as medical bills, collection accounts, credit cards, personal loans, utility bills, some judgments, and some older tax bills and penalties.

Non-dischargeable debts include things like alimony, child support, federal student loans, and debts that belong to someone else. 

How Does Bankruptcy Impact My Credit Report? 

A bankruptcy will show up on your credit report in a couple ways. The filing itself will appear, along with the individual trade lines, which will have “included in bankruptcy”. Each trade line is a debt that was defaulted upon (car loan, credit card, etc.) 

The impact of bankruptcy on your credit report is unfortunately pretty severe. According to FICO Credit scoring, the effect is generally a 130-240 point drop, depending on your starting credit score. For example a 680 credit score, will drop about 130-150 points, while a starting score of 780,would fall somewhere between 220-240 points. 

Steps to Remove Bankruptcy From Credit Report Early 

More than 50,000 US residents were forced to file bankruptcy during the unprecedented times of COVID-19. Some because of the challenges to manage their finances and others because of the economic downturn during the pandemic. 

Whether you’re from the former group or the latter, the only question that’ll spring to your mind is, “How to remove bankruptcy from credit reports?” Below, we’ve discussed a few ways to remove bankruptcy from your credit report. 

1. Check Your Credit Report for Errors

To check for errors, you’ll need a copy of your credit report. Free copies are available from AnnualCreditReport.com, a site that is endorsed by the Consumer Financial Protection Bureau (CFPB). Once you have your copy, review it carefully for incomplete or incorrect information. 

Here are a few of the fields to confirm: 

  • Your name, address, or phone number
  • Paid debts that still appear on your credit 
  • Inaccurate dates
  • Account Number
  • Date opened / Date closed (check all dates)
  • Account status (e.g., Closed)
  • Payment status (e.g., Collection)
  • Payment history
  • Delinquency date
  • Credit limit

2. Dispute the Incorrect Bankruptcy Information 

If you find an inaccuracy in your bankruptcy entries, you can write a credit dispute letter to the appropriate credit bureau.. 

If they’re unable to verify the bankruptcy, there is a good chance they’ll remove it. This is a bit of a long shot, particularly if the bankruptcy was in more recent years, but it does happen. If that happens, then you’re done. You win!

3. Inquire About the Bankruptcy Verification With the Credit Bureaus

If your credit bureaus verify the bankruptcy, you can send them a procedural request letter. This would involve you asking them about the procedure of bankruptcy verification. To begin with, you may ask them with whom they verified the bankruptcy.

They may claim that it was verified with the court (even if it’s not). In most cases, it will not be verified by the court, but if that’s what the bureau claims, you can proceed to the next step. 

4. Inquire About the Bankruptcy Verification With the Court

Inquiring about bankruptcy information with the court is your next best bet. However, make sure you get in touch with the court that your credit bureaus mentioned in particular. 

Next, you will need to reach out to the court that was specified by the credit bureau. If the court asserts that there wasn’t a bankruptcy verified by the court, ask for the response in writing. 

After receiving the documentation, make a copy, and mail it to the credit bureau with a demand to remove the bankruptcy from your credit report, as they are in violation of the Fair Credit Reproting Act. The bankruptcy should be removed.

Tips to Rebuild Your Credit After Bankruptcy 

There are several ways to improve your credit score after bankruptcy. Below we’ve discussed a few. 

  1. Pay on time. Your payment history accounts for about 35% of your credit score. Missing things like rent payments and utility bills could continue to negatively affect you. 
  2. Stay in cash as much as possible. Another important factor of a credit score is the credit utilization ratio. This is the amount of credit that you use relative to the amount of credit that is available to you. You will probably not have a whole lot of options available to you at the moment, so best to use those few options sparingly.
  3. Consider a secured loan or ‘self’ loan. Local banks and credit unions will often give you a loan secured by your deposit. This is a safe option for them, since they can access your savings/deposits if you stop paying, and is good for you as they report back your payment record to the credit bureaus. Self Financial is an online company that does something similar.

Final Words

A bankruptcy will stay on your credit report for 7-10 years, and will negatively affect your credit score during that time. If you’re willing to do the legwork (or pay a credit repair agency to do it for you), there is a chance you can identify some poor record keeping that gets the bankruptcy expunged earlier.

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