bankruptcy

[camelye]

If a bankruptcy is discharged is that good or bad for your credit rating? I filed for bankruptcy in 1998. Recently in my credit report there was a public notice saying it was discharged.

[Judge Roy Bean]

If a bankruptcy is discharged is that good or bad for your credit rating? I filed for bankruptcy in 1998. Recently in my credit report there was a public notice saying it was discharged.

Welcome to Quatloos, camelye.

A successful discharge of a Chapter 13 bankruptcy is far better than a dismissal but a bankruptcy will seriously depress a credit score for years.

Technically speaking, bankruptcies will remain on the credit reporting bureau's database forever but depending on which chapter and whether it was discharged or dismissed, it will be reported and used for either 7 or 10 years from the date of filing.

It will also show up in other databases - and the court paperwork will always be available.

[rogfulton]

You might want to also make sure the correct file number was reported and if not, contact the Clerk of the Court. Since you don't say how you got a copy of your credit report, I recommend the government mandated annualcreditreport.com site for free copies of your reports from the Big 3.

When my wife and I were trying to qualify for a mortgage <mumbled number> years ago, we realized her bankruptcy had been reported under three different chapters with three different file numbers (While two of them were incorrect, they all should have fallen off her report several years before). Once we contacted the Clerk of the Court, the corrections were made and a letter was given us to present the mortgage underwriters to that effect. Resulted in an 8% rate (prior to correction, rate was going to be 10.9%) which saved us over $100/month.

[Galee]

Hi Judge Roy Bean,
Thanks for making it clear that bankruptcy will be on credit reporting bureau's database forever but when it is discharged does it effects in getting loan?

[Cathulhu]

Galee, what do you think a credit report is for? Of course it would affect getting a loan. Welcome to Quatloos, now ask a smarter question.

[Prof]

Interestingly, in my experience, following entry of a discharge in a chapter 7 (liquidation) or a chapter 13 upon completion of the plan (adjustment of debt [thru a plan] by individuals [human beings and their spouses] with a regular income) may increase the ability to borrow money, since the new debt cannot be discharged again for 8 years after the date of the most recent discharge.

However, the cost of the debt may be high and available amounts will be more limited. And, generally speaking a discharge under chapter 13 is better for credit purposes than a discharge under chapter 7. In a chapter 13, the debtor(s) propose a plan to pay at least some of their unsecured debt. This indicates more responsibility than a chapter 7, which involves pushing all non-exempt assets, if any, to a trustee for liquidation of those assets and application to debt. Many, if not most, consumer chapter 7 are what are called "no asset" cases, with no distribution to unsecured creditors.