The other day I received an email from an AFM reader with several questions related to bankruptcy and credit reports. Since credit-related questions are one of my weaker areas, I have made it a habit to send those types of questions to author and MSN Money columnist, Liz Pulliam Weston. She sent me back a response which I have posted below.
I would like to know how long negative credit especially bankruptcy can be listed on an individuals credit report?
I also would like to know when the credit reporting timeline clock for individuals filing bankruptcy starts and ends? i.e. Is it reported from when an individual officially files with the court a bankruptcy?
Or is it when the bankruptcy discharges the bankruptcy case?
Most negative items can remain on a credit report for seven years (actually, seven years and 180 days from the date the account first went delinquent). Bankruptcy is one of the exceptions; that can remain on your credit reports for 10 years from the date of filing.
Interestingly, the bureaus tend to report Chapter 7 (liquidation) bankruptcies for the full 10 years, while Chapter 13 (repayment plan) bankruptcies are typically reported for only 7 years from the date of filing. Given that most Chapter 13 repayment plans take three to five years to complete, this means that all mention of the Chapter 13 could disappear within a few years after you finish your repayment plan.
How long the black mark remains should be only one of the factors you consider, though. You may be better off overall starting fresh with a Chapter 7 liquidation than struggling with a Chapter 13 repayment plan (particularly since about 2/3 of Chapter 13 plans “fail”–they aren’t completed or they wind up turning into Chapter 7s). Anyone considering bankruptcy really needs to talk to an experienced bankruptcy attorney about his or her options.
Hope that helps!
As a show of appreciation for Liz’s help, I thought it would be cool to give away two sets of Liz’s books. Two lucky winners will win one copy of each of the following books:
Easy Money: How to Simplify Your Finances and Get What You Want out of Life*
Your Credit Score: How to Fix, Improve, and Protect the 3-Digit Number that Shapes Your Financial Future (2nd Edition)*
As usual, the winners will be randomly-selected. And, as usual, I have two rules:
1. You must be a resident of the U.S. or Canada, andâ€¦
2. You can only enter ONE TIME!