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How bankruptcies and delinquent accounts affect credit

On Behalf of | Jan 16, 2023 | Bankruptcy Law

Individuals in Pennsylvania and around the country who file personal bankruptcies stop making payments on the accounts listed in their Chapter 7 and Chapter 13 petitions, but that does not mean these accounts are removed from their credit reports. Experian, Equifax and TransUnion provide a service to lenders and other organizations that make decisions based on credit scores and payment histories, and they have strict rules.

Delinquency dates

The credit reporting agencies remove accounts from a consumer’s credit report seven years after they become delinquent even if they are included in a Chapter 7 or Chapter 13 personal bankruptcy. This is usually when payments cease or the first late payment in a series of late payments is made. If an account included in a personal bankruptcy is current at the time of the bankruptcy, the seven-year waiting period begins on the date the bankruptcy is filed.

Bankruptcies on credit reports

The public records section of a credit report is where lenders can find out about information that is on file at local, state or federal courts. This is where the credit reporting agencies place judgements, liens and bankruptcies. Chapter 13 bankruptcies remain on credit reports for seven years, which means they are often removed at about the same time as delinquent accounts. Chapter 7 bankruptcies are usually discharged after a few months, but they remain visible to lenders for 10 years.

Fears over credit

Many people struggling with unmanageable financial situations do not file bankruptcy petitions because they are worried about what would happen to their credit scores. Delinquent accounts remain on credit reports for seven years whether or not a petition is filed, so submitting a Chapter 7 or Chapter 13 petition may not have that much of an impact. Filing for bankruptcy usually reduces an individual’s monthly expenses considerably, which sometimes causes credit scores to improve.



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