Bankruptcy can impact your credit report in ways you may not understand. When you file for bankruptcy, it is reflected on your credit report and can stay there for up to ten years.  Some people believe bankruptcy credit reporting is a bad mark.  However, what bankruptcy does is eliminate debt when debts are discharged in bankruptcy. This means that the accounts discharged in bankruptcy should be reported with a zero balance making you a potentially more attractive candidate for credit in the future since your outstanding debt is reduced by the bankruptcy discharge.  While true that some lenders may view you as a higher risk borrower due to the bankruptcy on your record, other lenders will see you as less of a risk if you have income since you cannot file for bankruptcy again without waiting a certain number of years, and since there would not appear to be a line of creditors  in a race to the courthouse to sue you for old, discharged debts.

There are several things you can do to help re-establish and rebuild credit after bankruptcy, such as opening a secured credit account, paying new and future credit obligations on time,  ​or being added as an authorized used to a credit account that is in good standing. While bankruptcy can have a negative impact on your credit report in the short term, you can rebuild your credit if you take the right steps. 

As mentioned, bankruptcy can stay on your credit report for up to ten years. However, the impact of bankruptcy on your credit score can be minimized over time, especially if you take proactive steps to improve your credit. By demonstrating responsible financial behavior, you can show lenders that you are a reliable borrower.

One of the first steps you can take after filing bankruptcy to rebuild your credit is to review your credit report to ensure that all discharged debts are reported accurately.  If there are credit report errors on your credit report after filing bankruptcy, these can cause you to be denied credit.  Lenders may assume that you either engaged in fraud that prevented you from obtaining a discharge of that debt, or that you became delinquent on a new or existing debt after your bankruptcy discharge. 

There are several types of post-bankruptcy credit report errors to look out for such as:​

1. Discharged debts not reporting as discharged in bankruptcy or with a $0 balance: Debts that are discharged in bankruptcy should be reported on your credit report as “Discharged in Bankruptcy” (or similar language), and with a balance of $0. 
   
2. New collection accounts being reported for discharged debts: sometimes debts that are discharged in bankruptcy will be sold or assigned either before, during, or after the bankruptcy. This type of credit report error can occur when a collector reports the collection account as having been "opened" after the bankruptcy even though other reported account information reveals that the collection account pertains to a discharged debt.  
   
3. Charge-offs Reported After the Bankruptcy Filing or Bankruptcy Discharge: Sometimes creditors will report a charge-off after your bankruptcy.  Charge-offs typically occur when an account is 90-120 days or more delinquent and are more derogatory than an account that is merely delinquent, but not charged-off. This is another type of credit report error after bankruptcy.
   
4. Failure to Accurately Report Reaffirmed Accounts. When you reaffirm a debt during bankruptcy, you remain liable for the debt after the bankruptcy. Therefore, the reaffirmed debt should not be reported as discharged in bankruptcy and  payments made after the bankruptcy should be reflected on your credit report. 

​If you are sued and a creditor gets a judgment against you, you may be able to discharge your personal liability for that judgment in a Chapter 7 bankruptcy, and your credit report should list the judgment as included in bankruptcy or discharged in bankruptcy.

This will depend on whether the underlying debt on that judgment is dischargeable in bankruptcy or nondischargeable.

​Nondischargeable Debts:
Certain debts are usually not automatically nondischargeable, such as student loans, child support or spousal support obligations, debts owed to government entities (fines, taxes, court costs, restitution in criminal cases, etc., post-petition HOA and condo fees, and, death or injury caused by driving under the influence, or DUI.
 
Other types of judgment debts may not be dischargeable if the creditor objects to a discharge, including, injury caused by a willful or malicious act, such as assault, fraud used to obtain money, goods or services, or fraud committed while in a position of trust, such as embezzlement while acting as a trustee or guardian.

Judgment Liens:
Even if you are able to discharge your personal liability on the judgment, there may be a lien that survives the bankruptcy. Under certain circumstances, you may be able to avoid a judgment lien in the bankruptcy, depending on available bankruptcy exemptions.  You should speak to a knowledgeable bankruptcy attorney about whether you can avoid a judgment lien in bankruptcy.
 
Dischargeable Judgments:
If a creditor sues you and gets a judgment for debts, including a judgment for credit card debt, medical bills, lease or rental agreements, and the debt is later discharged in bankruptcy, you should check your credit report to ensure that the judgment is updated after the bankruptcy. 
 
Judgments can remain on your credit report for up to 7 years from the filing date.  Your credit report should accurately report public record information, including judgments.
 
After filing bankruptcy, a judgment on a discharged debt should be reported as included in bankruptcy or discharged in bankruptcy.  You should check your credit report to ensure that the credit bureaus do not incorrectly report the status of the judgment, or report a current balance for discharged debt.  
 
If you believe your credit report contains errors, or incorrectly reports debts or judgments that were discharged in bankruptcy, you may  contact us by using our contact form at the bottom of our website.