Credit Score Impact after Chapter 7 Bankruptcy Discharge

Written by James Hirby | Fact checked by The Law Dictionary staff |  

The experts and those who have directly experienced the effects of a Chapter 7 discharge on their respective credit scores state that a debtor can expect a 100 to 200 point drop in each of the “big 3” credit score bureaus.  To know the actual impact, the experts say to wait sixty to ninety days after the discharge papers are delivered to query the credit score bureaus for the “after discharge” credit scores.  Expect to pay about $15 for each report; experts say that the debtor should get all three.  Debtor scores can be expected to be above 400 and below 600, as a norm.  Of course, every person’s situation is different.  The credit score before discharge could have already been relatively low if many late payments over many creditors were being reported.

The “benefit” of a Chapter 7 discharge is that debt other than secured, tax oriented, or student loans is likely gone.  The ability to make timely payments, to not be late, is most important.  The bankruptcy itself will be an item on the debtor’s reports for seven years, up to 10 years.  This is typical.   The credit report scores only take a hit once for the discharge.  Prospective loan or mortgage companies will be reluctant to provide credit unless they see a systematic improvement in the credit scores.  So, again, paying bills that are reported to the bureaus on time is an essential action on the debtor’s part.  The debtor can help the overall credit score situation by challenging each of the former late payments with a “not mine” challenge.  The credit bureaus will investigate the late payment postings by inquiry.  If the company that posted the late payment does not respond, the bureaus will reverse or remove the impact of the late payment.  Also, if the debtor has been making payments on time for a year or longer, the debtor can request that the creditor “re-ages” the account with the credit bureaus.  This action often causes prior late payment items to go away, thereby improving the stance with that creditor in the credit bureau’s score calculation.

A few particular people wrote that rather than having all creditors filing late payment reports to the bureau, if the debtor can whittle it down to only one or two, the impact on one’s credit score is not quite as devastating.  One person in particular was an advocate or even paying a little or a negotiated amount to each one of the creditors and not be late changes the overall result.  By doing this monthly, this person ended up being “current” on all credit accounts.  It is the way that the creditors report to the bureaus.  The credit card companies do not post that a debtor paid below minimum, they post if the debtor pays late.  Now, consider this.  If a debtor can negotiate monthly and ALWAYS be on time with whatever payment is accepted by both parties, the debtor credit score will improve.  Also, is it not likely that the need to file bankruptcy might go away?  Interesting point …

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