How to Remove A Bankruptcy from Your Credit Report
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Filing for bankruptcy can be a difficult choice, but sometimes the prospect of starting over and wiping your financial slate clean is the best option. One of the main downsides to filing for bankruptcy, however, is that it can reflect poorly on your credit report and cause your credit score to sink.
Living with bad credit may seem like a decent tradeoff for getting out of crippling debt you can afford. But what happens if you need to apply for a car loan, credit card, mortgage, or even rent an apartment in the future? Your FICO credit score is used to determine your eligibility for credit accounts and may also play a role in determining if you’re approved to rent a home or land a particular job in the future. With this in mind, is it possible to remove a bankruptcy from your credit report?
There are a lot of misconceptions about bankruptcy and credit reports floating around the internet. I’ll walk you through the different kinds of bankruptcy, explain when they fall off your credit history, teach you how to dispute an incorrect bankruptcy claim, and give you the details on credit repair companies.
Let’s dive in.
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Types of bankruptcy: Chapter 7 and Chapter 13 bankruptcy
There are two main types of bankruptcy and understanding the difference is important — since they both impact your credit report differently and handle charge-offs differently.
The first kind, chapter 7 bankruptcy, refers to when your debt is eliminated (sometimes entirely). Medical debt and credit card debt are the two main types of debt that can be discharged here. Student loan debt, however, is much harder, but not impossible to eliminate.
When this bankruptcy is filed, you may lose some valuable assets in the process which will be sold and used to pay your lenders.
Chapter 13 bankruptcy will reconfigure your debt into more affordable monthly payments — then discharge the balance after three to five years of successful payments.
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How bankruptcy impacts your credit score
In both cases, bankruptcy will show up on your credit reports for all three credit reporting bureaus, Experian, Equifax, and Transunion. A bankruptcy note on your credit report can indicate to future creditors that you’re unable to repay your debts. For this reason, they may be unlikely to lend to you while this mark is still on your report.
But, like all derogatory remarks on your credit report, bankruptcy will eventually fall off your credit report. Chapter 7 bankruptcy will fall off after ten years after your filing date, while chapter 13 bankruptcy will take seven years to fall off.
Bankruptcy will appear on the public records section of your credit reports until then — which could deter lenders from extending your credit and run the risk of you accruing new debt.
Can I remove bankruptcy from my credit report?
It depends. If you’re checking your credit report and notice a bankruptcy filing that you don’t recognize, you can dispute the false information. To do so, you’ll file a dispute with all three credit bureaus. This can easily be done online at Experian.com, Equifax.com, or Transunion.com. Filing a dispute is done to remove incorrect delinquencies from your credit report — it will not allow you to remove accurate information.
When you dispute a mark, the credit agency will attempt to verify its accuracy. If it cannot or finds the information to be incorrect, it will adjust your credit report, or remove the mark from your credit report completely. While doing this may lead to the inaccuracies being removed from the other credit bureau’s reports, as well, filing a dispute with all three credit reporting agencies is recommended.
The credit agency should alert you once a decision has been made about your dispute, by mail. To help, it’s recommended you provide as much information as possible to the agency to aid their investigation. This can include on-time payment records and credit statements,
If a bankruptcy claim on your credit report is correct, there’s not much you can do except wait for the designated period of time. If it doesn’t fall off after seven or ten years, you can file a dispute asking that the information be removed
Can credit repair companies help remove bankruptcy marks from credit reports?
Credit repair companies are businesses that often charge you money upfront — and monthly — while offering services advertised to improve your credit score and remove “bad” marks. While using one of these services may sound tempting, it’s important to proceed with caution.
First, you should know that credit repair agencies do not have the ability to do anything that you cannot do on your own. They often charge you to help you write a credit dispute letter, which you can also do when filing your own dispute at the respective credit bureaus. While these companies may have more manpower to reach out more frequently on disputes, they are not able to remove marks from your credit report that is accurate.
And, in many cases, credit repair companies will charge you for services they know they cannot provide, such as hiding negative items and information from your credit report.
That said, if you don’t have the time to file disputes on your own and want help, finding a reputable credit advisor with good ratings and a high Better Business Bureau rating is recommended. You can find a list of vetted credit counselors available on the U.S. Department of Justice website here.
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How can I improve my credit after filing bankruptcy?
First, understand that you’ll need to start small and take strides towards rebuilding your credit. If you have any remaining credit accounts, paying them on time and in full can help to build a history of healthy credit repayments.
If you don’t have credit accounts remaining, you can start by applying for a secured credit card, which allows you access to credit in exchange for a security deposit. This deposit then functions as your credit line. Using this card wisely — not exceeding 30% of your credit balance, making on-time payments, and paying your balance in full each month — can help you start to rebuild your credit.
It may take months or years to get approved for another credit account, so don’t get discouraged in the meantime. Services like Equifax Boost may help you count utility and rent payments towards your credit score and could offer a much-needed credit boost.
While credit can be important in today’s world if taking on too much credit caused you to file for bankruptcy, giving yourself a break from credit is not a bad idea. This allows you to put some distance between your bankruptcy and a new credit application, so you can apply for a new account when you feel financially ready.
What’s the best way to check your credit report?
To view your credit report and score, you can visit annualcreditreport.com, where you’re entitled to a free credit report from each credit bureau. And, under new legislation put into place during the pandemic, you can currently request credit reports each week — for free. You can also visit Experian, Equifax, and Transunion’s sites directly to request a free copy.
There are other services, such as Credit Karma and FreeCreditReport.com that also offer credit score access. In addition, sometimes your cell phone, internet, and other utility providers offer access. Personal finance apps like Mint and even some credit cards can also provide you with a copy of your credit score.
FAQs
Will all of your debt be erased in bankruptcy?
Not always. The types of discharged debts depend on the type of bankruptcy you file. Alimony, child support, student loans (most of the time), owed taxes, and other secured debts are often not discharged when filing for bankruptcy. This means you’re still on the hook for paying these debts.
Is bankruptcy a smart idea?
Bankruptcy is not something you should strive for, but it can offer a respite when debts become too overbearing. That said, you shouldn’t enter into bankruptcy lightly. Consider all of your options, such as refinancing, debt consolidation loans, and setting up repayment plans with lenders before considering a bankruptcy filing. You should also consider the types of credit you hold, since not all debt is dismissed through bankruptcy. Since bankruptcy claims allows lenders to seize your assets, such as property, opting for bankruptcy is not something you should take lightly.
How do I file for bankruptcy?
To file for bankruptcy, you’ll need to first compile all of your financial records to demonstrate hardship. Then, you’ll be required to attend mandatory credit counseling sessions 180 days before you can officially file. To file, you can fill out the paperwork with the court yourself or hire a bankruptcy attorney. Once filed, your case will be approved and often will require additional documentation. If approved, a bankruptcy trustee will be assigned to have a final meeting with you and the creditors to discuss the bankruptcy case findings. Following the finding, a bankruptcy stay (also called an automatic stay) prevents creditors from filing civil lawsuits against you.
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The bottom line
Claiming bankruptcy can impact your credit for up to a decade — and can make it more difficult to repair your credit report. In some cases, however, bankruptcy may be the best option. Understanding your rights under the Fair Credit Reporting Act can help keep you protected.
If you’ve filed for bankruptcy, you cannot remove this claim from your credit report until seven or ten years have passed — depending on the type of bankruptcy you filed. However, if bankruptcy appears on your credit report in error, you can dispute this claim.
Avoid credit repair company schemes claiming they can remove bankruptcy marks from your credit report and instead spend time repairing your credit by applying for a secured card.
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Writer
Courtney Johnston is a freelance writer, specializing in finance, travel, and health. She has written for The Chicago Tribune, Benzinga, BestReviews, Mashvisor, Fundera, MoneyGeek, and The Culture Trip. She also teaches writing instruction at the University of Indianapolis. Courtney currently resides in Indianapolis.
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