Email this page to a friendYour Bankruptcy Records and Credit Score
Two of the primary concerns of anyone who files either a Chapter 7 Bankruptcy or Chapter 13 Bankruptcy are issues that related to the records of their bankruptcy and how a personal bankruptcy will affect their credit report. While a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy will provide immediate relief from one’s debt, it is important to consider the impact that a personal bankruptcy filing has on public records, to whom a personal bankruptcy filing is disclosed and how a personal bankruptcy filing will impact a credit report and a credit score.
While a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy filing is a matter of public record, there are only a limited number of parties to whom a personal bankruptcy filing is directly disclosed. First, any correspondence with a bankruptcy attorney, or correspondence with any member of the bankruptcy’s attorney office, is confidential and privileged according to the doctrine of attorney-client privilege. This includes any direct conversations with a bankruptcy attorney, or his or her staff. In either a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy, the bankruptcy and petition and schedule discloses financial information about the bankruptcy filer for the purpose to prove to the court, the trustee and creditors that the bankruptcy filer is eligible to seek relief through bankruptcy. The personal bankruptcy petition and schedules are limited to information about the bankruptcy filer’s assets, income, debts and proposal to pay back some of his or debt as required in a Chapter 13 Bankruptcy. While the bankruptcy court will retain all records of the any personal bankruptcy filing, the fact a person has filed bankruptcy will typically be released only to the court, the trustee and creditors. No other party is directly notified, unless the bankruptcy filer wishes his or her attorneys to do so.
The filing of a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy will be reported on the bankruptcy filer’s credit report by the creditors, and it will impact the credit score. Although, the fact that a personal bankruptcy has been filed will remain on a credit report for up to ten years, the bankruptcy filer can still obtain new credit during that time. Further, any debts that have been discharged through a personal bankruptcy will be reported as such on his or her credit report, and the bankruptcy filer will no longer owe on those debts. While the exact impact of the personal bankruptcy filer’s FICO score will vary from person to person, and may depend on many different factors, the typical FICO score will be reduced between 120 point and 220 points. Since the bankruptcy filer’s debt has been eliminated with a successful bankruptcy, the bankruptcy filer now has an opportunity to rebuild his or her credit and increase his or her FICO score. Keep in mind that approximately 33% of the FICO score is determined in relation to debt-to-income ratio. Immediately after bankruptcy, the filer’s debt-to-income ratio has been greatly improved.
After a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy, a personal bankruptcy filer should use the repayment of secured debt, such as already existing home loans and cars, along with new unsecured debt to rebuild their creditor and FICO score. They should also keep track of what types of information is being reported to the three major credit report bureaus, Equifax, TransUnion and Experian. You make sure that all of the information on their credit activity is reported properly so they can maximize their FICO score and their credit worthiness.
