A Simple Guide to Removing a Bankruptcies from Credit Reports
Going through bankruptcy can be exhausting. However, if you’re trying to start over, it’s one of the better options to get a clean slate.
Once you’ve filed for bankruptcy and you’re trying to repair your credit, there are a few things you should know. For example, how to get a bankruptcy off credit report early, and how long a bankruptcy stays on your credit report.
This guide will explain to you the process of removing bankruptcies from a credit report, though it’s not always possible. Additionally, you’ll want to be vigilant and rebuild your credit in the most effective and efficient manner available to you. You can do this alone or with the help of a credit repair company.
Keep reading for more information on bankruptcies, and follow these simple steps on your way to credit recovery.
What Does a Bankruptcy Do to Your Credit?
Before you can start learning how to remove a bankruptcy from your credit report, you have to understand a question that most people ask after they’ve completed the process: how does a bankruptcy affect your credit?
A Bankruptcy is a negative mark on your credit file that can cause issues with getting a loan, credit card or anything else requiring you to have good or great credit. Because bankruptcies are one of the bigger “negative items” (“information”) when it comes to credit, it quickly causes you to get denied credit, even if your credit score is considered good (it’s possible).
How Long Does a Bankruptcy Stay on Your Credit Report?
There are several types of bankruptcies when dealing with consumer credit, chapter 7 and chapter 13, so we need to be specific here.
Below we will outline the different types, how long they stay on your credit report and other effects of the bankruptcies on your credit file.
Different Types of Bankruptcies
Chapter 7 vs Chapter 13 on Credit Reports
A Chapter 7 bankruptcy is also called a liquidation or straight bankruptcy. This form of bankruptcy can eradicate numerous types of unsecured debts. For example, if you’re struggling to pay your bills and your payments are long-overdue to the point that you can’t afford your everyday living expenses, you may need to consider filing for Chapter 7 bankruptcy.
It resets your finances and it should only be used as a last resort. The caveat here is that you may end up having to relinquish some of your belongings. Also, filing a Chapter 7 will have a long-lasting impact (negative) on how creditors view your creditworthiness.
How Long Does Chapter 7 Stay on Your Credit Report?
You can’t get a Chapter 7 credit report wiped clean before the ten years are up after filing. Unless you note any inaccuracies or mistakes, it cannot get expelled prematurely. Since this type of filing results in none of the debt getting repaid, it takes quite some time for it to automatically fall off of your credit report.
After it’s legally filed, a Chapter 7 bankruptcy can stay on your credit file for up to 10 years. Yes, 10 years. This is why it’s very important to consider any and all alternatives to getting out of debt before choosing to go the Chapter 7 route. If you do file for Chapter 7 you can expect the information to automatically fall off after that 10 years.
For a Chapter 13 bankruptcy you should expect 7 years before the information falls off automatically. Again, always try to find alternatives before filing for either.
How Long After Chapter 7 Can I Buy a House?
You can obtain a mortgage loan to purchase a house after Chapter 7 bankruptcy. In general, you should wait at least two years after the courts say that it is eligible, but it also depends on the type of loan. Government-backed loans can be easier to get, more so than a conventional loan. A mortgage lender may want you to wait even longer, possibly closer to four years.
Be sure to rebuild your credit during the time when you’re preparing to purchase a home. Avoid accumulating any new debt during this time as that can further hinder your chances of getting a loan for a house.
How Does Filing a Chapter 7 Bankruptcy Work?
Once you’ve intimated the process to file a Chapter 7 bankruptcy, the court will automatically place a temporary hold on all current debt. That will prohibit creditors from continually collecting payments, foreclosing your home, garnishing your wages, evicting you, repossessing your property, or cutting off your utilities.
At that point, the court will have legal possession of your property, and they’ll appoint a trustee to oversee your case.
Their job as trustees is to go over your finances and review your assets. Some properties are non-exempt, and the bank will not allow you to keep them; the bankruptcy trustee will sell that property. They will use that money to pay off any creditors that you owe.
Next, they’ll arrange a meeting between yourself and the creditors. That is called a creditor meeting, and it requires you to head down to the courthouse and respond to questions regarding the filing.
You’ll get a list of any property that you don’t have to give over to creditors or sell, known as exempt property. The total value varies from state to state. You will find that certain places allow you to select between federal exemptions and their exemption list. However, for the most part, Chapter 7 cases don’t include assets. All of the individual’s property is exempt, or there’s a lien against it.
Once the process is finished, which usually takes four to six months from when you start the filing, the court discharges any remaining debts. At that point, you are debt-free, and you don’t owe anyone anything.
Be mindful that certain forms of debt cannot get discharged via bankruptcy. That includes alimony, child support, student loans, some debts, and court fees.
Now, let’s see how long does a chapter 7 stay on your credit, and what you can do about it in the meantime.
How Long Does a Chapter 13 Bankruptcy Stay on Your Credit Report?
A Chapter 13 bankruptcy is also known as a “Wage Earner’s Plan.” It permits individuals with a regular income to construct a plan to repay a part or all of their debts. With this bankruptcy plan, the debtor proposes a way to repay all the creditors that they owe by making installments for a period of three to five years.
If their monthly income is less than the state median, they will repay for only three years unless the courts determine differently. If their income exceeds the state median, in general, they’ll repay over five years. For this period, creditors are not allowed to start or continue to make efforts to collect on the debt you owe.
The primary difference between a Chapter 7 and a Chapter 13 bankruptcy is that you have the right to retain all of your assets while also extending the repayment period of debts for the three to five years previously mentioned.
With Chapter 7, any assets not exempt, like your car or house, get liquidated. Those assets get turned over to the bankruptcy trustee appointed by the court. Once the money received from selling non-exempt assets gets reviewed by the trustee, they distribute it to creditors. The rest of your debt gets scrubbed.
Certain earners are eligible to file a Chapter 13 case if the amount of unsecured debt (medic bills, credit cards, and so on) is lower than $419,275. Their secured debt (property, car, home, and so on) has to be lower than $1,257,850.
These amounts will change every three years depending on the consumer price index. At the time of this writing, these numbers are in place until April 2022.
Keep in mind that only husbands and wives that file their taxes together, or individuals, can file Chapter 13. Businesses are ineligible for this type of bankruptcy case. Whoever files must prove that they’ve filed federal and state income taxes for the previous four years.
Lastly, they must agree to receive credit counseling from an agency approved by the EOUST.
How Much Do You Have to Pay Back in a Chapter 13 Bankruptcy?
In general, the average amount that a debtor pays per month is $500-$600. It does, however, depend on your situation and how much you receive in regular income.
How Long Does Chapter 13 Stay on the Credit Report?
The Chapter 13 bankruptcy stays on your credit report for seven years and is less damaging to your credit than the Chapter 7 filing. The only way to get this erased from your record is for inconsistencies or information not verified.
How Long After Chapter 13 Can I Buy a House?
Depending on the type of loan you’re trying to get, you should wait between two and four years to try to get a house loan. An FHA loan is a good option after filing for bankruptcy because it lets you purchase a home while having a lower credit score than is usually required.
How Does the Process Work for Filing Chapter 13?
While you can file Chapter 13 on your own, it’s best to consult a bankruptcy lawyer familiar with the numerous exceptions and laws in the process. The court fee is $310 to file, and you may incur anywhere from $3,500 to $5,000 for your lawyer fees.
Again, the debtor develops their plan to repay the creditors. They have to write it and submit it to the bankruptcy court when your case starts. The federal court will provide you with a form for your first draft, or you can pick one up from your local courthouse.
Your plan must get approved by the bankruptcy court for your filing to be successful. The repayment structure illustrates your property, income, expenses, debt, and how you will get current on your payments.
The assigned trustee will review everything, ensure that the plan is compliant with bankruptcy laws, receive your payments, and use them to pay off creditors. They will ensure that the debtor adheres to the terms outlined in the repayment plan.
The payments get allocated to your priority debts firstly, then secured debts, and lastly, the unsecured debts.
Priority debts are salaries, commissions, and wages that you owe employees, tax debts, child support, and other types of debts like this. The debtor has to pay all priority debts in full. Secured debts such as car and house loans also have to get repaid in full. Lastly, unsecured debts with no collateral backing like utility bills and credit cards may require no payments or full payment, depending on the judge.
How To Get Bankruptcy Off Credit Report
Understanding how credit truly works can be a difficult concept to grasp, especially when you’re younger. By the time you realize it’s essential, you may have made some questionable decisions that you now regret.
If you’re trying to improve your credit score, you might wonder, how long does bankruptcy show on a credit report? Continue reading to discover all you need to know to improve your credit score.
Removing a Bankruptcy
Follow these steps to try to get the bankruptcy removed before the appointed time:
Step 1. Review Your Credit Report to See If They’re Are Any Discrepancies Regarding the Bankruptcy
For this critical step, you’ll need a copy of all three of your credit reports. This instance is the exact situation where having a credit monitoring service pays off majorly. Try out TransUnion; it’s the best credit monitoring service in our humble opinion; what’s more, you get a credit score free of charge.
Next, be sure to look over the credit report for accuracy and to know that the information is complete. Below you’ll find a list of some of the most frequent bankruptcy errors:
- Names
- Phone numbers
- Addresses
- Incorrect dates
- Discharged debts that still have a balance
Once you’ve scrutinized your credit report for accuracy and haven’t found any inaccuracies having to do with the information, then, unfortunately, there’s no way to remove anything prematurely. Waiting for 7–10 years for it to fall off your credit report will be your only resort.
Step 2. File a Dispute Against Inaccurate Entries By Using a Credit Dispute Letter
On the other hand, if you’ve found inaccurate information on your credit report, then your recourse is to dispute the inaccuracies with each credit bureau with the help of a credit dispute letter.
They have 30 days to respond and resolve the dispute. If they do not, they will be violating the Fair Credit Reporting Act, so you can take legal action and have your entry removed from the report. However, it’s very unlikely that they do not respond.
The best possible outcome is that the credit bureaus will be incapable of verifying that bankruptcy and, as a result, expunge it from your credit report. However, if your bankruptcy is recent, this outcome is highly unlikely.
Interestingly, the older the bankruptcy, the better chance you’ll have of getting it removed from your credit report. At any rate, if this happens for you, then you can happily ignore the following steps.
Please continue to the next step if your bankruptcy happens to be verified by the credit bureaus.
Step 3. Inquire with the Credit Bureaus About How Your Bankruptcy Got Verified
After the bankruptcy has been verified, you’ll have to submit a procedural request letter asking the bureaus with whom they verified your bankruptcy.
There are situations where they will attest that it was verified through the courts when in reality it wasn’t. Keep in mind that in most instances, bankruptcies for the credit bureaus aren’t verified by the courts.
However, if the credit bureau claims that it was verified by the courts, please continue to step four.
Step 4. Ask the Courts How the Bankruptcy Received Verification
Your next task is to contact the courts that the credit bureaus indicated.
You will have to inquire as to how they went about verifying your bankruptcy. If the courts say that they haven’t verified anything, be sure to ask for that statement in writing.
Once you receive the letter with the verified statement, mail it to the credit bureaus and firmly demand that they remove the bankruptcy because they knowingly submitted false information and therefore are currently in violation of the Fair Credit Reporting Act.
If everything goes according to plan, your bankruptcy will be removed.
Hiring a Company vs Doing It Yourself
Repairing your credit can be a herculean task to do alone, and you may not have the disposable income to hire a professional credit repair company to get the job done for you. It can seem as if you’re stuck between a rock and a hard place, and this is understandable.
Having said that, hiring a professional to help with bankruptcy comes highly recommended by us. The steps above are advanced steps that are in most situations best left to credit repair professionals.
They are more experienced with the credit bureaus and the court systems. They are simply more skilled to deal with this situation.
But quite honestly it can be costly to hire a credit repair company, and it’s not entirely impossible to get the bankruptcy removed through your efforts.
Can You Legally Repair Your Credit?
Even though many legitimate companies perform credit repair services, it’s also easy to get scammed. For this reason, you should vet any and every company that you consider for the job.
It should be said that the FTC advises against soliciting the help of a credit repair company that assures you that they can erase negative data that’s correct. Also avoid those companies that promise a new identity if you use their credit privacy number.
Thanks to the Credit Repair Organization Act, companies have to give you a clear total of the estimated costs and also a timeframe that you should expect results. Moreover, you can take advantage of the three business days allowed for service cancellation without getting charged.
A legitimate company will guide you on how to deal with your credit accounts to prevent further damage. Furthermore, a trustworthy company will refrain from making guarantees about certain results, and they won’t encourage you to be dishonest either.
How Do Credit Repair Services Help?
Reputable credit repair companies will review your credit reports for details and claims that should not be on your report. They’ll then refute this information for you with knowledge of any stipulations and all bankruptcy laws. Additionally, they will ensure that none of the information reappears.
Credit bureaus have no more than 30 days to investigate any false statements or accounts on your credit report that have gotten disputed. Remember, they do not have to investigate any filed disputes that they regard as being “frivolous.”
They can address the following errors:
- Any accounts that are not legally yours.
- Any legal actions or bankruptcies that do not belong to you.
- Any misspellings that resulted in the bureau confusing your name with someone that has a similarly spelled name. That can mean negative information pops up that isn’t yours, or positive details should get shown that aren’t.
- Any outdated negative marks that shouldn’t get included but are still showing.
- All past due balances that can’t be verified or validated.
What Is the Cost to Hire a Credit Repair Company?
You’ll have to pay a fee per month to the credit recovery service provider. On average it’s usually around $70–$150, and the entire process from start to finish might require four to twelve months. You might also incur a fee to set everything up in the beginning when you start using their services.
Moreover, the repair services may come in multilayered packages. Related services might be available, such as being able to view credit scores or credit monitoring.
Is It Possible to Repair My Credit Alone?
Absolutely! We have a guide to remove negative items from your credit report.
For starters, check your credit reports from all three of the major credit reporting bureaus. The credit bureaus are as follows: Equifax, Experian, and TransUnion.
You can use a site like AnnualCreditReport.com to access these bureaus. Next, follow these few simple steps:
Try disputing inaccuracies on your report: Be mindful that each bureau has an online process for disputes. That will most likely be the fastest way to get the problem rectified.
Find information that’s accurate but unsubstantiated: These details must get removed if they are unverifiable. For instance, having a debt to a retailer that is now out of business; unless the retailer sold your debt to a collection agency, this information stands the chance of being unverifiable.
Try to start paying your bills on time: Paying your bills on time or late is the most important variable when it comes to affecting your credit score. Missed payments can negatively affect your score drastically.
Don’t use available credit as frequently: The term that refers to your available credit card limit is known as your credit utilization ratio. The lower this number is, the better score you’ll have. Try making smaller payments during your billing cycle, as well as other strategies that can help to lower your credit utilization ratio.
It doesn’t matter if you’re hiring a company to repair your credit or you’re doing it alone. It’s wise to have a working plan to build and maintain your credit score now and into the future.
Fair Credit Reporting Act Section 609 Loophole
A 609 letter depends on the credit bureaus’ obligation to report only verified information. The premise behind the loophole hinges on the fact that you’re asking creditors to produce information that is difficult to find, such as the original signed copy of your credit application. That would make it difficult to verify such a disputed item.
When it comes to the FCRA dismissed bankruptcies and the rights afforded to you by the FCRA, a 609 letter may present the opportunity to remove unsubstantiated or erroneous information from your credit report, but not a bankruptcy.
Frequently Asked Questions
Here are the responses to the questions most commonly asked regarding how long does bankruptcy stay on your credit:
1. How Much Will Credit Score Increase after Bankruptcy Falls Off?
After your bankruptcy finally falls off of your credit report, you can expect your credit score to increase anywhere from 50 to 150 points. Bankruptcy credit scores can negatively affect your score immensely, but once it is off, you will see a considerable boost in your score.
2. Do You Have to Dispute with All 3 Credit Bureaus to Remove Discharged Bankruptcy from Credit Report?
When disputing your credit report and the account on them, it’s crucial to make a dispute with all three credit bureaus. If this seems challenging, hire a skilled professional credit repair agent who better understands this process.
3. How Long Can a Bankruptcy Remain on a Credit Report?
Public records of bankruptcy happen to be deleted from credit reports anywhere from 7 to 10 years from the date that the bankruptcy got filed. The time may vary depending on which chapter you filed.
4. What Is a 609 Letter and Can It Be Used to Remove a Bankruptcy?
A 609 letter is a credit repair right to request the credit bureaus to remove erroneous entries from your credit report. This letter gets its name from section 609 of the Fair Credit Reporting Act.
It cannot be used in removing bankruptcy, but you can use it to remove erroneous or unsubstantiated accounts from your credit report.
Final Thoughts
Hopefully we’ve answered most, if not all, of your questions about how to remove a bankruptcy from your credit report. Remember that you always begin by disputing the claims with all three major credit bureaus. From there, follow the specific steps outlined to achieve the desired results of having your bankruptcy removed.
Finally, remember that hiring a professional credit repair agency to work on your behalf will always be better than doing it yourself, especially if you can afford it.
