Credit Reporting During Bankruptcy

The Fair Credit Reporting Act requires credit reports to be accurate. What is accurate reporting during a bankruptcy case?

In general, creditors have no duty to report anything at all to credit reporting agencies. Consequently, many will simply stop reporting any debt information once informed of a bankruptcy case.
However, sometimes a credit report will reflect a balance for a debt that was included in a bankruptcy. When should this balance be set to zero? During a bankruptcy, which in the case of a Chapter 13 can last several years, or only after the bankruptcy is concluded and a bankruptcy discharge appears?
The answer is that a debt does not need to be listed as having a zero balance until a discharge makes it so. While a bankruptcy is pending, the debt balance still exists while the debt cannot be legally collected. Having a pre-bankruptcy debt balance stay on a report during a bankruptcy is sometimes harmful to credit during that period.

However, the duration of a Chapter 7 case is brief-three to four months-and one cannot usually obtain new credit during a Chapter 13 bankruptcy. So, even though it lasts longer, credit during a Chapter 13 bankruptcy is usually not necessary. When it is necessary, like in the case of a proposed mortgage refinancing, sometimes it is possible to work with a mortgage broker or lender to do quick disputes and get disputed trade lines off a report to complete the transaction. Often a lender will not re-report the debt under those circumstances for fear of violating the automatic stay.

by Nicholas Ortiz, Boston Bankruptcy Attorney · Posted in *Life After Bankruptcy