It’s surprisingly common for people exiting New York bankruptcy to see their credit scores improve. This phenomenon is generally attributed to the fact that debtors have taken the responsible course of action with their debts, rather than letting them spiral into default. Alternatively, creditors may be interested in taking advantage of former debtors’ inability to discharge their debts again for a few years, depending on the chapter they used.
Despite the benefits of filing bankruptcy to one’s credit score, many debtors don’t want to see it on their credit reports. Unfortunately, there’s little they can do about it—at first. The Fair Credit Reporting Act (FCRA) allows credit reporting agencies to keep a bankruptcy filing on a credit report for no fewer than ten years, and it requires them to disclose the chapter debtors filed in provided they are informed of it. However, there are ways consumers can try to lift a bankruptcy filing from their credit reports.
(1) Ask them. Seriously, sometimes the credit reporting agencies will remove a bankruptcy if they are asked to do so. They’re more likely to agree if it was a chapter 13 filing, and the bureau might agree after seven years rather than demanding the full ten.
(2) Make them. This only works if there’s an inaccuracy on the credit report, such as a bankruptcy the consumer never filed or one that has been on the report for longer than ten years. Consumers can directly challenge the credit bureaus if they can show there is an error.
(3) Notify them that the bankruptcy filing was withdrawn. Doing this won’t lift the bankruptcy from the report, but it will clarify it. The clock for the ten-year limit on the credit report begins when the bankruptcy case is filed, not when the case is closed. That means credit bureaus will include a bankruptcy filing even for debtors who do not receive a discharge. The FCRA, though, allows debtors to require the credit agencies to note that the filing was withdrawn. This can be beneficial for debtors whose debts may not have been dischargeable, for example, but who nevertheless began successfully paying down their debts outside of bankruptcy.
Although it’s a slightly separate topic, errors on credit reports can be corrected, and for New Yorkers, it’s now easier to do.
Credit scores are not the be-all-end-all of credit access, but they can be important. Fortunately, the FCRA gives consumers (and former bankruptcy debtors) some tools to ensure their creditworthiness is properly reported. For people who have significant debts, it’s helpful to hire an experienced New York bankruptcy lawyer to handle the matter. It’ll be better for a credit score than defaulting.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced business bankruptcy lawyer Bruce Weiner for a free initial consultation.
