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CA Judge: Pending Chapter 13 Cases Not Required on Credit Reports
California resident Daina Reckelhoff filed for Chapter 13 bankruptcy on April 30, 2015. Her plan of reorganization was approved by the bankruptcy court 33 days later, on June 2, 2015.
Lasting anywhere from three to five years, the reorganization plan is the central feature of every Chapter 13 bankruptcy case, not only in California but throughout the United States. Absent from Chapter 7 bankruptcy, which instead involves liquidation of assets, the Chapter 13 reorganization plan allows debtors to keep their belongings, their vehicles, and even their homes in exchange for monthly payments, which are structured so that secured debts (such as mortgages) and priority debts (such as child support) are paid first.
A Chapter 13 bankruptcy cannot be discharged until the debtor has completed his or her reorganization plan, a process which can take anywhere from 36 to 60 months. Until then, information about the pending case need not be disclosed on the filer’s credit report, as Judge Armstrong recently ruled in Reckelhoff v. Experian Info. Sols, Inc. (2017).
Reckelhoff, claiming damages under both the federal Fair Credit Reporting Act (FCRA) and the California Consumer Credit Reporting Agencies Act (CCRAA), brought the action against Experian after discovering that information about her pending case was absent from her credit report. However, the court dismissed the lawsuit after pointing out that filing for bankruptcy did not necessarily guarantee a future discharge.
Writing the opinion for the court, Judge Armstrong noted, “he mere confirmation of a payment plan is insufficient to alter the legal status of a debt; this is so because if a debtor fails to comply with the Chapter 13 plan, the debtor’s bankruptcy petition can be dismissed – in which case the debt will be owed as if no petition for bankruptcy was filed.”
It should be quickly noted that residents of the Roseville, Sacramento, and Folsom areas will generally file for bankruptcy in the U.S. Bankruptcy Court for the Eastern District of California, which has jurisdiction over Placer and Sacramento Counties, among more than two dozen others. The Sacramento Division processes bankruptcy cases at the Robert T. Matsui United States Courthouse, which is located at 501 I Street in downtown Sacramento. The Sacramento Chapter 13 attorneys of The Bankruptcy Group can make sure that your bankruptcy documents are filed in the right place in a timely fashion.
How Long Does Chapter 13 Last on Your Credit Report?
Regardless of whether the case is ultimately discharged or dismissed, a Chapter 13 bankruptcy will generally remain on your credit report for a period of seven years. Fortunately, the seven-year period begins counting down from the filing date, not the date of discharge (which may fall anywhere from three to five years after the filing date). While the length of time is the same for dismissed cases and discharged cases – seven years, in either situation – case dismissals should be indicated on the credit report.
Each of the three major credit bureaus – TransUnion, Equifax, and Experian – should remove the bankruptcy from your credit report automatically after a period of seven years has elapsed (or, in the case of a Chapter 7 bankruptcy, after a period of 10 years has elapsed). However, it is still a good idea to check your credit report for accuracy. Regardless of when or whether you have filed for bankruptcy in California or elsewhere, you are entitled to receive one free copy of your credit report per year, upon request, from each of the credit bureaus.
Your Credit Score After a Chapter 13 Discharge
The bad news is that Chapter 13 bankruptcy will initially cause a drop in your credit score. The good news is that the drop is only temporary – and furthermore, with many of your debts now conveniently restructured thanks to bankruptcy, you will be better able to build and maintain good credit going forward. Though the timeline varies from person to person, most debtors in California are able to establish good credit within approximately two to four years of receiving a bankruptcy discharge.
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