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Remove Bankruptcy and Charge Off From Credit Reports

Remove Bankruptcy and Charge Off From Credit Reports
Bills.com Team
UpdatedDec 2, 2022
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    3 min read
Key Takeaways:
  • A bankruptcy filing will appear on your credit reports.
  • Review your credit reports to make sure your bankruptcy was reported accurately.
  • Get no-cost copies of your credit reports at AnnualCreditReport.com

How To Remove Charge-offs and Bankruptcy From Credit Reports

Charge-off (sometimes called "write-off") is an accounting term used by creditors when they move a delinquent account from its accounts receivable books to its bad debt ledger. This usually occurs between 180 and 240 days from the date of the last payment. The fact that an account is charged-off does not mean the debt may not be collected later. The charge-off date also does not correspond to the statute of limitations on collecting a debt, or the date that an entry on a credit record must be removed. All three dates or deadlines are independent of each other and have different meanings.

Because an account is charged off does not mean the creditor lacks a legal right to collect the debt. To the contrary, the creditor may move the account to its own internal collections department, or sell the debt to a third-party collection agency.

Bankruptcy and Credit Reports

Generally speaking, any account included in a bankruptcy filing will appear on credit reports as "included in bankruptcy," and reflect a $0 balance. It should not appear as open and past due. To correct this problem, you should first pull a copy of your credit report from each of the three major credit bureaus (Equifax, TransUnion, and Experian), then carefully review the reports to identify which discharged accounts are being reported inaccurately.

Get free copies of your credit reports at AnnualCreditReport.com, a Web site sponsored by the credit bureaus in compliance with federal law allowing all consumers to obtain a no-cost copy of each bureau’s credit report once every 12 months. Next, dispute the incorrect listings with the credit bureaus. See the Federal Trade Commission document FTC Facts for Consumers: How to Dispute Credit Report Errors for more information.

When disputing an account discharged in bankruptcy, include a copy of your credit report showing the inaccurate listing, as well as a copy of the order of discharge from the bankruptcy court, to show that the same account appearing on your report as delinquent was discharged in your bankruptcy filing. Once the credit bureaus receive your dispute letter, they should forward the documents to the creditors in question so the creditors can either challenge the disputes or correct the inaccurate listings. Given the fact that these debts were discharged in bankruptcy, there is no reason that the accounts should not be updated to reflect an accurate status. Having these accounts correctly listed on your credit reports should reduce their negative impact on your credit score, helping you rebuild a credit score after a bankruptcy filing. Although an account discharged in bankruptcy is not good for your credit score, having both a bankruptcy and delinquent balances on your credit report is usually worse.

Credit reports can be inaccurate, so it is important to review your credit profile regularly to verify all of the information reported by your creditors is correct. Carefully monitoring your credit history and disputing inaccurate items can increase your credit score significantly, which could save you thousands of dollars in interest on a mortgage, auto loans, and other forms of credit. To learn more about credit scoring and credit reports, visit the Credit Solutions section of Bills.com.

Did you know?

Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q2 2022 was $16.15 trillion. Housing debt totaled $11.71 trillion and non-housing debt was $4.45 trillion.

According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

Each state has its rate of delinquency and share of debts in collections. For example, in Wisconsin credit card delinquency rate was 2%, and the median credit card debt was $371.

To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.

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10 Comments

TTim Johnson, Dec, 2019

Wow, thanks for the great article!

AAnne Gibson, Mar, 2017
Almost 10 years ago I filed ch 7 bankruptcy. I reaffirmed my 2nd mortgage because I wanted to keep my house. That loan has come due, and I am trying to refinance it but the bank is giving me a hard time listing denial reason as "denied due to account charged off". I have no charge offs on my credit report so I can only assume they are referring to a credit card from said bank that was included in the bankruptcy. Can they do this?
DDaniel Cohen, Apr, 2017

First, did you press them to ask what account or accounts show as charged-off?

Second, speak with other lenders, to see if they give you the same answer.

aann marie, May, 2012
My husband filed for bankruptcy due to unemployment (now back to work) and was discharged this spring 2012. We had two joint card cards. Both cards are shown as being included in the banruptcy on his credit report but my credit report shows both as being charged off. We have a letter stating that all debts were included and discharged including those two credit cards. I don't work & stay home with kids and my credit score is now ruined. How will this affect me? Will those companies come after me?
BBill, May, 2012
I will assume the credit card accounts were joint accounts, and that you were not just an authorized user. In theory, it is possible for the creditor to pursue all joint account holders for a debt, even if one of the joint account holders had the debt discharged in bankruptcy. In practice, however, it is not common for creditors to do so.

You asked about your credit score. See the Bills.com article Short Sale, Foreclosure & Your Credit Score to learn what Fair Isaac & Co., the creator of the FICO score, says about the time to recovery on common negative events.

If you were an authorized user, and not a joint account holder, then the derogatory will appear on your credit report but the credit card issuer has no legal claim against you.