Many people living in California struggle with debt and may seek a financial fresh start in the form of bankruptcy. One area that may give debtors some pause, however, is that of one's personal credit history. Many consumers believe that a bankruptcy can seriously damage their credit score and may scare off potential employers, landlords and insurance companies.
Bankruptcy affects people's credit scores and histories in different ways. In fact, there are often differences between credit reports issued by different bureaus. All three bureaus reported bankruptcies for seven years, except that, until recently, Equifax handled credit scoring for some Chapter 13 filers differently than other credit bureaus.
In a Chapter 13 bankruptcy, debtors agree to a three-to-five-year debt repayment plan that is supervised by the court. At the end of the plan, the debts are discharged by the judge. Unfortunately, many debtors have difficulty meeting their payments, and their cases may be dismissed. TransUnion and Experian, two of the three major credit reporting agencies, continued to report the dismissed Chapter 13 bankruptcy for seven years after the case was filed. Equifax, however, would report for 10 years.
The result is that if an employer, landlord or lender ordered a credit report from Equifax, it would show the old dismissed bankruptcy. This negative information could be used against the individual as they attempted to apply for credit, housing or a job. However, under public pressure, Equifax has announced its decision to only report dismissed bankruptcies for seven years.
Individuals who are considering filing for bankruptcy may benefit from speaking with an experienced attorney. The lawyer may be able to review the client's case and make recommendations as to the type of bankruptcy that is appropriate while also counseling the client on ongoing credit reporting issues.