How Long Does Bankruptcy Follow You?
Bankruptcy is a tough decision and a tougher process, but for some people it is the only way to escape crushing debt. In most situations, the law protects you against the stigma of bankruptcy becoming a lifelong concern.
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Credit Reporting
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Under the federal Fair Credit Reporting Act, a bankruptcy can remain on your credit report for up to 10 years. However, some credit bureaus remove a Chapter 13 bankruptcy from your report after seven years. They do this because a Chapter 13 bankruptcy involves a repayment plan, rather than a quick discharge of your debt. The exception to this rule is when you apply for a loan over the amount of $150,000 or a job that pays over $75,000. In these cases, the credit bureaus do not have to remove your bankruptcy information, no matter how old the case.
Dealing With Lenders
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While bankruptcy can cause your credit score to take a serious hit, the passage of time reduces its impact. Be frank with lenders about your bankruptcy before they pull your credit report. Your lender may look for mitigating circumstances, such as a lot of medical debt, before making a decision about granting you credit.
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Employment Discrimination
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Employment discrimination against those who have completed bankruptcy is illegal. Your current employer can't fire you, nor can a potential employer refuse to hire you, just because of your bankruptcy case. However, employers can use other negative credit information against you when making a decision about employment. A bankruptcy case can also affect your ability to get a security clearance, which may be required for some jobs.
Zombie Debt
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Even though you are under no legal obligation to pay debts discharged in bankruptcy, you may be harassed by debt collectors who specialize in buying discharged bankruptcy debt for pennies on the dollar, then trying to persuade folks like yourself to pay it. Unfortunately, these companies often use illegal and deceitful tactics in their attempts to get you to pay the debt. In some cases, these companies will put information about your old, bankruptcy-discharged debts on your credit report in hopes that you will be desperate enough to pay them. Don't fall for their lies: Contact your bankruptcy attorney at once if you are contacted by one of these companies. Under the Fair Debt Collection Practices Act, you can send these companies a letter ordering them to cease and desist all contact. You can also dispute any negative information placed on your credit report with the credit bureaus.
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