Bowen Ten Cardani, PC

Call Us For Your Initial Consultation


Impact of bankruptcy filings on credit reports

Virginia debtors will experience both short- and long-term effects after filing for bankruptcy. Typically, people falling behind on payments have declining credit scores. Although declaring bankruptcy represents a negative on a credit report, people often gain points on their credit reports in the immediate aftermath. Researchers determined that the short-term rebound occurs because the debtors' scores had dropped so low that the initial clearing out of debt improves their ratings.

One analysis of bankruptcies done by a Federal Reserve bank of New York economist showed that some debtors experienced a gradual rise in credit scores. Their average scores hit low marks of 520 to 530 before recovering somewhat after a bankruptcy.

Despite the short-term improvement, bankruptcy creates a long-term red flag on a debtor's credit report for seven to ten years. Two credit bureaus, TransUnion and Experian, kept Chapter 7 bankruptcies on people's records for 10 years and Chapter 13 bankruptcies for seven years. They treated Chapter 13 differently because it represented a partial payment of debts unless a debtor failed to complete the bankruptcy plan. Until recently, another credit bureau, Equifax, flagged people's credit reports for a full 10 years if they did not successfully complete a Chapter 13 plan. During the time that a bankruptcy appears on someone's credit report, basic needs like renting an apartment or hooking up utilities could be impeded.

If a debtor is eligible to file under Chapter 13, then an attorney could help prepared and submit the repayment plan for the court's approval. Filing puts at least a temporary halt to collection activities and creditor harassment.

No Comments

Leave a comment
Comment Information
Email Us For A Response

We’re ready to work with you.

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy

Bowen Ten Cardani, PC

Richmond Office
3957 Westerre Parkway, Suite 105
Richmond, VA 23233

Toll Free: 866-601-7371
Phone: 804-767-6850
Richmond Law Office Map

Ashland Office
9410 Atlee Commerce Blvd, Suite 2
Ashland, VA 23005

Toll Free: 866-601-7371
Phone: 804-767-6850
Ashland Law Office Map

Rated By | Super Lawyers | Rising Stars Britney McPheron
Super Lawyers | K. Matthew Long