Bankruptcy clients are always concerned about how a bankruptcy filing affects their credit history and ability to obtain new credit. Although filing bankruptcy does not enhance your credit score at the time, your credit score was almost certainly shot already by the circumstances that led to the bankruptcy filing, so the immediate adverse impact is minimal. Since filing bankruptcy offers a fresh start by eliminating overly burdensome debt, bankruptcy can be a significant component of repairing your credit. Your credit score going forward will increase gradually as you develop a positive payment history on open accounts.
Both the Bankruptcy Code and the Fair Credit Reporting Act (which regulates what a consumer reporting agency may include in your credit report) are Federal law, so the same rules apply to all states.
Your credit report may include information on a Chapter 7 or Chapter 13 bankruptcy for 10 years from the commencement of the case. It is reported that at least one major consumer credit reporting agency removes information about Chapter 13 after only 7 years, though it is not legally required to do so.
Most other credit information is reported for 7 years. Civil suits, civil judgments, and arrest records may be reported longer if the governing statute of limitations period is longer. For example, in Minnesota, a money judgment is effective for 10 years, and may be renewed for an additional 10 year period. A Minnesota civil judgment is likely to be reported for as long as it remains unsatisfied up to 20 years.
The restriction on reporting any credit information do not apply to reports for:
- credit transactions involving, or which may reasonably be expected to involve, a principal amount of $150,000 or more;
- the underwriting of life insurance involving, or which may reasonably be expected to involve, a face amount of $150,000 or more; or
- the employment of any individual at an annual salary which equals, or which may reasonably be expected to equal $75,000, or more.
A summary of your rights under the Fair Credit Reporting Act can be viewed here: http://www.yale.edu/hronline/careers/screening/documents/FairCreditReportingAct.pdf.
The governing statutes, as amended December 18, 2010, can be viewed at the Federal Trade Commission's site, http://www.ftc.gov/os/statutes/fcradoc.pdf.