Lexington Law & Bankruptcy
- 6 min read
Will Lexington Law Remove a Bankruptcy From Your Credit Report?
Errors on credit reports are common. According to the Federal Trade Commission, "one in five consumers have an error on one their three credit reports." Errors are so common that credit repair companies like Lexington Law focus their businesses on fixing errors appearing in consumer credit reports.
Credit repair appeals to many people because small improvements in your credit score can make a difference between qualifying for or being denied credit. It also affects your interest rate for mortgages, auto loans, and credit cards. Some insurance companies base their rates on your credit score. Many landlords check credit reports and the presence of a bankruptcy could lead to the rejection of a rental application.
The Credit Repair Organization Act (CROA) requires credit repair companies to tell the truth about their services. They must: 1) Detail the services they’ll perform in a written contract; 2) Give you 3 days to cancel the contract; 3) Explain how long it will take to get results; 4) Show the total cost you will pay; and 5) Spell-out any guarantees.
Bankruptcy, Your Credit Score, and Your Credit Report
Bankruptcy is the single most devastating action that can harm your credit score. Depending on your existing score, a bankruptcy can slash your FICO score from 130 to 240 points. Given the harm a bankruptcy causes, it is natural to want to remove it from your credit report as fast as possible.
A bankruptcy notation appears on your credit reports, listed in the Public Records area, after you file for bankruptcy. Your credit report shows the kind of bankruptcy you filed for (Chapter 7 or Chapter 13), the filing date, and the date of discharge or dismissal.
Importantly, the accounts you include in your bankruptcy will also have a notation on your credit report that shows anyone viewing your report that a bankruptcy took place. Under each account that you listed in your bankruptcy, there is a notation that says something like, "Account included in bankruptcy."
Can Lexington Law Firm Remove a Bankruptcy Successfully?
The key to whether Lexington Law, another credit repair firm, or you, acting on your own, are able to remove a bankruptcy is whether the notation on your credit report is accurate.
As mentioned, it’s really easy for incorrect information to appear on your credit credit report. Lexington Law is careful to write on its Web site its services are designed to remove incorrect information appearing on credit reports.
Read the Bills.com Lexington Law Review to learn more about Lexington Law Firm. This page also contains hundreds of comments from happy and unhappy former customers who share their results of hiring Lexington Law.
There are a few ways that it is possible for a bankruptcy to appear on your credit report improperly. The most common are due to a confusion about identity, such as:
- You have the same first and last name as someone who actually filed for bankruptcy.
- There is confusion over the suffix to your name. For example, John Smith, Jr. ends up with the bankruptcy showing on his credit, when his father John Smith Sr., is the one who filed.
- Your Social Security Number is confused, in error, with another person whose SSN is similar to you.
If you did not file for bankruptcy, but your credit report shows that you did, then you can dispute the mistake on your own or hire a credit repair firm. The credit bureaus will check with the court and verify whether your dispute is correct or if you indeed are listed as having filed for bankruptcy. If you did not file for bankruptcy, the notation will be removed.
Removing a Bankruptcy When You Actually Filed
According to Lexington Law, it removed 21,417 bankruptcies from client credit reports in 2012. This impressive number is misleading, however. Equifax, Experian, and TransUnion each publish information about your payment habits.
If Lexington Law removes erroneous reports for you from Experian and Equifax, it counts this as two removals. Also, Lexington Law does not subtract removals from its total when removals are later reversed and reinserted onto consumers’ reports.
The CROA outlaws five actions: 1) Credit repair companies cannot promise to permanently remove negative information from a credit report, even when the information is accurate and not obsolete; 2) Require advance payment for credit repair services; 3) Not provide a written statement of "Consumer Credit File Rights Under State and Federal Law" before any agreement is signed; and 4) Fail to include in a contract conspicuous statements about the consumer’s right to cancel service within three business days.
A big problem with companies like Lexington Law Firm is the possibility that they over-promise what they can accomplish for you.
On Lexington Law's website, it is careful not to guarantee success when you hire them. While Lexington Law may make it clear that they can't guarantee removal, the fact that they list how many bankruptcies they've been successful at removing may lead consumers to make the leap that even accurate bankruptcy notations can be deleted.
Also, a representative you speak to on the phone may indicate that they will try to remove the bankruptcy, but leave you with the impression that accurate information can be removed.
Even if they were lucky enough to get an accurate listing to be removed from your Public Records area of your report, the individual accounts that you included in your bankruptcy remain on your report. Their notations would show that they were part of your bankruptcy.
If you applied for a loan or credit account, after a bankruptcy you actually filed was removed, an underwriter would see the derogatory account history and be highly unlikely to approve your loan or credit application.
It's also the case that accurate negative information that is removed from a credit report can reappear.
Unpaid debt dragging down your credit score? Contemplating bankruptcy? Talk to a pre-screened Bills.com debt resolution partner to learn your options for resolving your debts.
File a Dispute on Your Own
There is nothing that Lexington Law can do for you that you can't do for yourself. When it comes to removing a bankruptcy that shows on your report, file a dispute with each of the consumer credit reporting agencies when the bankruptcy appears in error. If you don't feel you can handle filing a dispute yourself or are too busy to take care of it, then you should consider hiring Lexington Law or another credit repair firm.
Don't hire anyone to dispute a bankruptcy that you actually filed. The bankruptcy should fall off your credit report 10 years after the filing date, according to federal law. The credit bureaus remove Chapter 13 bankruptcies after 7 years. The negative accounts included in the bankruptcy should fall off 7 years after their date of first delinquency,even if the bankruptcy notation remains in the Public Records area.
Bills Action Plan
- Check your credit report for errors on a regular basis. You can get a free report at annualcreditreport.com.
- File a credit report dispute online, for free, when you find any errors on your report.
- If Equifax, Experian, or TransUnion do not delete or correct inaccurate information on your credit report, see the Bills.com Method of Verification article describing the next steps you can take to correct your credit report.
- Don't pay a professional credit repair firm to remove accurate information from your report.
Dealing with debt
If you are struggling with debt, you are not alone. According to the NY Federal Reserve total household debt as of Quarter Q4 2022 was $16.91 trillion. Student loan debt was $1.60 trillion and credit card debt was $0.99 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 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
The amount of debt and debt in collections vary by state. For example, in Texas, 37% have any kind of debt in collections and the median debt in collections is $1997. Medical debt is common and 19% have that in collections. The median medical debt in collections is $835.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.