Mike from Buffalo lost his job and experienced financial difficulties in 2003 that resulted in his filing for bankruptcy. Since that time, he has carefully managed his finances and has had steady employment for the last three years. He is looking to purchase a home, but feels he is not being presented with the lowest interest rates as the bankruptcy posting remains on his credit report.
He wants to know if this is an error the credit reporting agency needs to fix, as he understood that all derogatory and delinquency related information is required to be purged from the credit report after seven years.
Mike is correct that, generally speaking, most all derogatory and delinquency related information is required to be purged from an individual’s credit report once it hits the seven year mark and the credit reporting agencies have automated processes in place to make that happen.
An exception to the seven year rule relates to certain types of bankruptcies. With a Chapter 7 bankruptcy, certain consumer assets are liquidated to pay off outstanding debts to creditors. Once filed, this type of bankruptcy is typically discharged with no further payments made by the consumer.
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The most other common consumer bankruptcy is a Chapter 13 — which is a plan under which the court may approve a repayment plan. With a Chapter 13 bankruptcy, the consumer must make partial payments to the creditor periodically over a period of several years. Once the repayment plan is complete, the bankruptcy is discharged.
Note, a bankruptcy is deleted based on the filing date.
Chapter 7 bankruptcy is deleted 10 years from the filing date because there is no repayment of any of the debt. Chapter 13 bankruptcy is deleted seven years from the filing date because a portion of the debt is repaid under the discharge plan.
Here is a general summary of how long “negative” information will stay on the credit report:
- Late payment information — 7 years
- Foreclosures — 7 years
- Collections — 7 years (depending on age of the debt being collected)
- Derogatory Public Records — 7 years (unpaid tax liens may remain longer)
- Bankruptcy — 7 years for completed Chapter 13, 10 years for Chapter 7
Remember, the older these negative items are, the less impact they have on the score (assuming no other more recent negative items are posted on the credit report). It is always a good idea to periodically check your credit report to ensure your information is being accurately reported.
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