People who find themselves buried under unmanageable levels of debt often consider discharging this debt by filing for bankruptcy protection. When someone files for personal bankruptcy, his or or her debt can be discharged or reorganized, depending on the type of bankruptcy that a person qualifies for. In cases when a person has the debt discharged, he or she should be able to expect that their credit report will reflect the change.
However, over the years, many people have noticed that their credit report is showing that the debts discharged through bankruptcy still appear to be past due. This error in the report has negatively affected many people’s credit score for years.
Several years ago, a class-action lawsuit was filed by plaintiffs who had discovered that discharged debts were still appearing on their credit reports as being past due. Even as people were working to rebuild credit and avoid additional debts after bankruptcy, the old debts that were not properly updated as being discharged continued to do damage to their credit rating.
The plaintiffs in the lawsuit stated that even when they made the bureaus aware of the errors, often times nothing was done to fix the problem. The lawsuit ended with a $45 million settlement, which was thrown out in an appeal.
Since the lawsuit, however, Equifax, TransUnion and Experian, which are the three major credit bureaus, have stated that they have improved their reporting procedures. According to sources, steps have been taken to ensure that debt discharged through bankruptcy is no longer listed as an active debt.
Filing for bankruptcy can certainly be a challenging time in a person’s life. While it can temporarily upset a person’s credit rating, filing for bankruptcy can give people a clean slate by discharging eligible debt. Making sure that a credit report accurately reflects this can be crucial for folks who are working to improve their credit.
Source: The New York Times, “Credit Reports More Accurately Reflect Debts Discharged in Bankruptcy,” Ann Carrns, April 30, 2013
Related Posts: Fees for payday loans reaching into the billions around the US, Unpaid workers affected by furlough may be considering bankruptcy, New Jersey residents not feeling great about medical debt, Avoid overspending by avoiding these situations