The Fair Credit Reporting Act and Bankruptcy

The cornerstone of the federal bankruptcy law is the discharge at the end of the debtor’s case. The discharge provides the debtor with a new opportunity for a fresh financial start without the encumbrance of overwhelming debt. But a “fresh start” is not possible if the debtor continues to be penalized by past financial mistakes. Consequently, the federal law not only forbids a creditor from seeking to collect on a discharged debt, it also directs credit reporting agencies to report the debt accurately to avoid any indirect penalty.

The Fair Credit Reporting Act (FCRA) is a federal law that directs the collection and use of consumer credit information by credit reporting agencies. The FCRA contains two powerful provisions that debtors should know after receiving a bankruptcy discharge. The first is that credit reporting agencies are to list a discharged debt as “discharged in bankruptcy” with a “zero balance.” Any negative activity (delinquent payments, etc.) prior to the date of the bankruptcy filing can remain on your credit report for up to seven years. However, any negative information listed on your credit report that occurred after the date of the bankruptcy filing is a violation of the bankruptcy law and should be removed. This includes a post-filing transfer of the debt to a collection agency.

The second powerful FCRA provision is the amount of time a bankruptcy filing can remain on your credit report. The FCRA states that a bankruptcy can remain on your credit report for ten years after the date the bankruptcy case was filed. Note that the ten year period starts from the date the case is filed with the court, and not from the date you receive your discharge. This limitation is the maximum time the bankruptcy report can remain on your credit report.

The Fair Credit Reporting Act directs credit reporting agencies to maintain simple procedures for disputing inaccurate information. Once you file a dispute, the credit reporting agency must verify the accuracy of the information or remove it from your file. You are entitled to one free credit report each year by contacting the individual credit reporting agency. While there are dozens of these agencies, the most popular are Equifax, Experian, and Trans Union. A free credit report can be obtained from each of these credit reporting agencies by going to a joint website at: http://annualcreditreport.com

Understanding your credit report rights is an important part of your fresh start after bankruptcy. Debtors who correct credit report errors and rebuild their credit histories through responsible use of credit can quickly improve their credit scores to average or above average levels. If you need specific advice on improving your credit after bankruptcy, consult with your bankruptcy attorney.

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