What Happens to Your Credit Report During a Chapter 13?

Credit Scores

Credit Scores (Photo credit: Casey Serin)

With credit being so important in being able to rent, travel, or buy necessities like automobiles, your credit report is important to the average person even if that person has recently filed bankruptcy. So, what happens to your credit report during a Chapter 13 bankruptcy?

This question was recently asked by a blogger who was in the middle of a Chapter 13 plan. He wrote, “I filed Ch 13 in 2010. And I must say its the best thing that’s happened to me. I just checked my credit reports after all of that time and had a couple questions. What happens to the accounts/creditors that didn’t file a proof of claim with the attorney? Is there something I need to send to them? My fear is, even after the bankruptcy, I’d show owing them and they cause negative reporting on my reports. Any help appreciated!”

It doesn’t really matter what bankruptcy you file, you will be required to list all creditors you owe. Even in a Chapter 13, the creditors failing to file a claim to be a part of your pay back plan will have their debt discharged if they have been listed on the creditor’s list.

Technically speaking, the creditors who have discharged debts should not be allowed to report anything to the credit reporting agencies about the debt. The credit reporting agencies will be notified of the bankruptcy discharge and should place the information on the credit reports as such. There may or may not be any score ramifications on the report depending when the reports were first made. Your credit scores will not continue to take hits over the bankruptcy once the initial reports have been scored.

During a Chapter 13 plan, your credit score normally slowly increases as you pay your regular bills on time. The key words are on time. You should never be late on paying your bills if you want the credit scores to go up, and your bills should be paid in full each payment period.

If you do not trust the bankruptcy court and credit reporting systems to properly handle the credit reporting matters, you can always send a copy of your creditor lists from the bankruptcy court records that show where the creditor failed to file a claim, but they were included on the creditor’s list. Normally, the credit reporting agency will take it from there.

In the event this doesn’t work, and the creditor continues to file reports, you should have your bankruptcy lawyer notify the offending creditor of their mistake. These types of actions by creditors can appear to a bankruptcy court that they are actively trying to collect a debt against the automatic stay. A letter sent by your lawyer pointing the fact the creditor might be in violation of the automatic stay will usually correct the problem. Carbon copying the letter to the credit reporting agencies will also most likely help.

Theoretically, your credit score should slowly rise during a Chapter 13 plan, if you are paying your bills in full and on time. Should things be different, it is always good to consult with your bankruptcy attorney about such matters.

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