A credit report is a tool that helps a lender determine risk when issuing a loan to someone. The report tracks several different factors for creditworthiness, including income levels, late payments, and bankruptcies. However, these factors change over time, and eventually an individual’s bankruptcy “falls off” of the credit report and is no longer considered a factor.Pursuant to 15 U.S.C. § 1681c, any bankruptcy can remain on a person’s credit report for 10 years. However, in practice that is not typically the case. In spite of the reporting latitude allowed them under 15 U.S.C. § 1681c, the three major credit bureaus (Experian, TransUnion, and Equifax) maintain a voluntary policy to remove Chapter 13 bankruptcy after seven years, while Chapter 7 is generally not deleted until ten years after the bankruptcy is filed. The commentary I have read on the reason credit bureaus report Chapter 13 bankruptcies different than Chapter 7 bankruptcies is primarily an attempt to shape policy. The common consensus among policy and law makers seems to be that Chapter 13 is better for the economy than Chapter 7. To that end, the credit reporting policy is meant to encourage Chapter 13 over Chapter 7. As this reasoning may suggest, to the extent chapter 13 cases are removed after seven years rather than ten years, that removal is voluntary. However, it is a ‘voluntary’ policy that has been very precisely followed by the major credit bureaus for many years.Also, it is worth noting that while bankruptcy remains part of a person’s credit history for seven to ten years, the impact of bankruptcy on a person’s credit score lessens more quickly than people sometimes realize. For the substantial majority of my clients, they are projected to have a better score twelve months after their bankruptcy completes than they did before they filed bankruptcy. If you’re struggling financially or if you’d like to explore your options, you owe it to yourself to talk to a qualified Kansas bankruptcy attorney. Call us today!by Adam Mack, J.D.Hillary Stirling, research assistant
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