How To Remove A Bankruptcy From Your Credit Report
In 5 Steps
If you're trying to remove a bankruptcy from your credit report, you can do so by following these five steps:
- 1Review your credit reports. Check to see if there are ANY errors on your credit report regarding the bankruptcy.
- 2File a dispute. Dispute the bankruptcy with the credit bureau(s) while making sure NOT to admit any fault.
- 3File a verification request. If the credit bureau denies your dispute, make them verify their information about your account is accurate.
- 4Send a letter to the court administrator. Follow up with the court to make sure the credit bureau actually verified your bankruptcy.
- 5Follow up with the credit bureau. Send a letter to the credit bureau saying the court was unable to verify your account records, and request another deletion.
We'll dive into this process in much greater detail and also look into what else you can do if a bankruptcy is dragging down your credit.
How to remove a legitimate bankruptcy from your credit report
I hate to start with the bad news, but here you go: if you have a legitimate bankruptcy on your credit report—meaning, you filed the bankruptcy, went through the legal process, and you know the bankruptcy is the real deal—the chances of getting it removed early are slim.
But credit repair is all about knowing the rules of the game and using little technicalities to your advantage.
And one thing you MUST understand is that the credit bureaus are required by law to report items on your credit report accurately—and this includes bankruptcies.
If you can find something inaccurate about the way the bankruptcy is reported, you may have a chance at getting it deleted from your credit report.
In other words, you shift the burden of proof to the credit bureaus by requiring them to verify that the bankruptcy is totally and completely accurate.
Here's how to do it:
Step 1. Review your credit reports for ANY errors
Start by reviewing your credit reports and looking for ANY errors regarding your bankruptcy.
By law, you're entitled to a free copy of your credit report once every 12 months, and you can request your free report by visiting www.annualcreditreport.com.
Once you have your credit report, check it over for accuracy.
You want to look for any type of error: a misspelling of your name, an incorrect address, the wrong account number, the wrong date, etc.
Basically, any type of technicality that you can use in order to bring on a dispute.
Step 2. File a dispute
Your next step is to file a dispute with the credit bureaus.
Important: When you do this, do not admit ANY fault or that the bankruptcy is legitimate.
Instead, simply state that you're disputing the bankruptcy and point out exactly which aspect of it you believe is inaccurate.
Keep in mind that you're more likely to be successful if you dispute a specific detail about the way the bankruptcy is reported rather than the entire bankruptcy itself.
For example, you might dispute an inaccurate filing date or discharge date.
You can also file a dispute if your credit report lists the wrong type of bankruptcy (a Chapter 7 versus a Chapter 13).
These smaller details are more difficult for the credit bureaus to investigate than the bankruptcy as a whole.
Step 3. File a verification request
If the credit bureaus claim that your bankruptcy is accurately reported, the next step is to make them confirm where they got their information about the bankruptcy.
Under the Fair Credit Reporting Act (FCRA), the credit bureaus are required to tell you the source of their information when it comes to the items on your credit report.
In your letter or communication requesting verification, ask the credit bureaus to confirm the following information:
Chances are, the credit bureaus will claim they verified the bankruptcy with the court.
But here's the thing: the federal bankruptcy courts explicitly state that they "do not provide information to the credit reporting agencies."
We will use this bit of information to our advantage!
Step 4. Send a letter to the court administrator
If the credit bureaus claim they verified their information with the bankruptcy court, you can also write the court yourself, asking the court administrator about its procedure for verifying records with the credit bureaus.
When you do this, be sure to include a self-addressed stamped envelope to increase your chance of getting a response.
When you contact the bankruptcy court, you might have to dig a little bit to find the right department and address for your letter.
Start by visiting the court's website, and then look for any tab or menu item that says "clerk's office" or "clerk of courts."
The court's website should list phone numbers for various departments—don't hesitate to call around to make sure you're sending your letter to the correct department.
Depending on which court you're dealing with, you might receive any number of responses.
But the bankruptcy courts say they don't verify bankruptcy information with the credit bureaus. Instead, the courts post bankruptcies on their dockets, which are public records.
In short, if a credit bureau claims it "verified" your bankruptcy with the court, this almost certainly isn't true.
If you can get a letter from the court saying as much, you might have a chance of getting the credit bureau to remove your bankruptcy.
Step 5. Follow up with the credit bureaus and request a deletion
Once you have a letter from the court stating that it hasn't verified your bankruptcy with the credit bureaus, follow up with the credit bureaus.
Mail another letter saying you contacted the administrator of the courthouse and they told you they don't furnish records and information to the credit bureaus.
And be sure to include a copy of the court's response letter to back up your statements.
In your follow-up letter, you should also request a deletion of your bankruptcy based on a lack of verification.
There is no guarantee of success, but it's definitely worth a try!
How long does a bankruptcy stay on your credit report?
Depending on what type of bankruptcy you file, your bankruptcy can remain on your credit report for up to 10 years.
There are actually four types of bankruptcy, but you'll likely only deal with Chapter 7 or Chapter 13. (Chapter 11 is used by businesses, and Chapter 12 is reserved for commercial farmers and family fisheries.)
Chapter 7 bankruptcy
Chapter 7 bankruptcy is the most common type of bankruptcy.
With a Chapter 7, you liquidate your assets and pay off your debts.
Most people hire a bankruptcy lawyer to help them claim "exempt" property, which is property they can keep even after the bankruptcy has finished.
Debts get discharged (wiped out), which means you get to start over with a clean financial slate.
On the downside, a Chapter 7 will stay on your credit report for up to 10 years.
Chapter 13 bankruptcy
Chapter 13 bankruptcy works a bit differently compared to a Chapter 7.
Instead of liquidating your assets and discharging your debts, you agree to a payment plan to repay as much of your debt as possible over three to five years.
You might also hear Chapter 13 referred to as a "reorganization" bankruptcy.
As you might expect, a Chapter 13 is more complicated than a Chapter 7, which is why few people attempt it without the help of a bankruptcy lawyer.
If you file a Chapter 13, it will remain on your credit report for up to seven years.
How does a bankruptcy impact your credit score?
Depending on where your credit score was to start with, you can expect your bankruptcy to drop your score by 150 to 200 points, and sometimes even a bit more than 200 points.
But the negative impact does lessen over time.
As the months and years pass, you'll likely see your credit score go back up—this is because the bankruptcy clears your debts, which means those negative items no longer factor into your credit score.
A bankruptcy may also help improve your credit utilization rate (the amount of credit you're using compared to your total available credit), which can boost your credit score over time.
After seven or 10 years, depending on which type of bankruptcy you filed, the bankruptcy will drop off your credit report and will no longer affect your credit score.
While a bankruptcy will undoubtedly hurt your credit score, it's often better than allowing unpaid bills and collection accounts to pile up on your credit report.
If you're consistently struggling to keep up with your financial obligations, bankruptcy might be a good option.
Can a credit repair company help?
The short answer is: maybe.
After you file for bankruptcy, you can expect to be swamped by a deluge of offers from companies offering debt relief, credit repair, or half a dozen other similar services.
First, it's important to be wary about any company that promises to restore your credit for a fee.
Unfortunately, there are plenty of scammers out there that prey on people who have just filed bankruptcy and are desperate to repair their credit score.
Remember that your bankruptcy case is public record, which means anyone can look it up and contact you.
On the other hand, legitimate credit repair companies can sometimes succeed where the average consumer can't.
While you can most certainly go through the steps of removing a bankruptcy on your own, the process can be time-consuming, overwhelming, and often frustrating.
Credit repair companies are experts at what they do, and they're familiar with all the rules and laws that govern credit bureaus.
Credit repair companies also have the resources and time to tackle your bankruptcy all at once, whereas you might get slowed down by work obligations and daily tasks that make it tough to concentrate on getting the bankruptcy deleted.
If a bankruptcy is dragging down your credit score, it might be worthwhile to talk to a credit repair company.
Take a look at our review of the top 5 credit repair companies.
Keep in mind that these companies charge a fee for their services, so you'll need to factor cost into your decision.
Rebuilding your credit after bankruptcy
Bankruptcy can be a low point in your financial life, but it's not the end of the world.
Many people describe bankruptcy as a fresh start or a clean slate. If you approach it this way—with a determination to learn from past mistakes—you can start rebuilding your credit right away.
To do this, you can implement a number of credit repair strategies, although it's best to pick one or two rather than attempting to take on every strategy at once.
Here are a few to consider:
Secured credit cards
Many people start the bankruptcy recovery process by opening a secured credit card.
With a secured card, you make a small deposit, which acts as collateral.
As you make purchases and pay them off, your creditor reports your on-time payments to the credit bureaus.
Many secured credit cards have an option to transition to an unsecured card with a higher limit after a certain period of time.
Credit builder loans
You can also apply for a credit builder loan, which can help boost your credit score.
With a credit builder loan, the lender deposits a certain amount of money in a sort of savings account, and you make payments into the account. (See our full Self Lender review).
Once you've "paid off" the balance, you get your money back, plus any interest your lender offers.
Basically, you pay yourself over time, and the lender reports your payments to the credit bureaus.
Become an authorized user
Another strategy for boosting your credit score is to become an authorized user on someone else's account.
If you know someone (like a parent or spouse) with good credit, ask them to add you as an authorized user on one of their credit cards.
If you choose this strategy, you'll want to make some kind of agreement to pay your share of the card balance.
You should also make sure the creditor reports your payment history to the credit bureaus—you can verify this by contacting the credit card company and asking if they report an authorized user's payments to the credit bureaus.
Moving forward after a bankruptcy
There's no question that bankruptcy is a major disruption and it can topple your credit score for a long time.
On the other hand, if you're at the point of filing, it's likely your score is already on the low end.
While you probably won't be able to remove a bankruptcy from your credit report before it's due to fall off, there's no harm in trying.
If you're unable to get the credit bureaus to remove your bankruptcy, focus on the positive.
Discharging your debt can turn the page on past mistakes and reveal the fresh start you need to take back control of your finances.
With some patience and good money management habits, you can start the credit recovery process sooner than you think.