Credit Report Changes for Chapter 13 Bankruptcy Filers

If you file for Chapter 13 bankruptcy, how long does information about that consumer bankruptcy remain on your credit report? According to a recent article in ProPublica, for most consumers who look at their TransUnion and Experian credit reports, they will find that the credit reporting agencies report Chapter 13 bankruptcies for seven years. However, Equifax had been reporting consumers’ Chapter 13 bankruptcies for a longer period of time. Indeed, “hundreds of thousands of people who had filed for bankruptcy under Chapter 13” discovered that their history of bankruptcy remained on their credit report for 10 years if they failed to complete their bankruptcy plans.
The good news is that Equifax has changed this policy, but it is not yet clear how many consumers have been affected. If you filed for Chapter 13 bankruptcy more than seven years ago and were denied credit, the denial may have been a result of Equifax’s policy. You should talk to a bankruptcy attorney in Oak Park.
Consumer Harms and Bankruptcy Reporting Policies
While filing for Chapter 13 bankruptcy may be able to help consumers to manage their debt and to get back on track financially, in the months and years immediately following a bankruptcy filing, it can be difficult to get approved for credit or to have other applications approved. As the ProPublica article clarifies, credit reporting agencies often underscore how “having a bankruptcy in your credit history will seriously affect your ability to obtain credit for as long as it remains on your report.”
In addition, as we mentioned, bankruptcy can affect your ability to have other types of applications approved. For instance, the article highlights, bankruptcy “can also affect your ability to qualify for things like an apartment, utilities, and even employment.” In some cases, car insurance rates can also increase after you file for bankruptcy. As such, most consumers wait to file certain types of applications or for major lines of credit until their bankruptcy history no longer appears on their credit report. As MyFICO.com explains, completed Chapter 13 bankruptcies are only supposed to remain on a credit report for seven years, while Chapter 7 bankruptcies can remain on your credit report for 10 years.
Why did Equifax Treat Chapter 13 Filers Differently?
For those consumers who completed their Chapter 13 repayment plans within five years of filing, Equifax did remove the bankruptcy “flag” from their credit report after seven years. However, for “those who were unable to complete their five years of payments and had their cases dismissed were saddled with a flag for three additional years.” According to ProPublica, Equifax did not have a clear rationale for this discrepancy.
How many consumers would have been affected? There are more people than you might think who file for Chapter 13 bankruptcy but do not complete the terms of the repayment plan. About 50% of Chapter 13 cases end up being dismissed, and that often happens when the filers are behind on their required payments. Those individuals who had their Chapter 13 cases dismissed were treated differently by Equifax than by Experian and TransUnion, the other two credit-reporting agencies. Further, many of those consumers may have applied for credit after seven years under the assumption that the bankruptcy would no longer be reported, only to learn that they were denied credit.
Do you have questions about filing for Chapter 13 bankruptcy? An experienced Oak Park consumer bankruptcy lawyer can help. Contact the Emerson Law Firm today to get started.
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