If an account is discharged in consumer bankruptcy, how will this be reflected on my credit report? 

Credit repair is one of the hallmark reasons for a consumer to consider the option of bankruptcy. While a Chapter 7 or Chapter 13 bankruptcy will be reported on a consumer credit report for a period of seven years, the consumer stands to gain significant benefits in that overwhelming revolving debts will be forgiven and erased from memory -- right? Well, not always so lawmakers have proposed a potential legislative solution. 

Under current regulations, banks and credit card companies are not necessarily required to report a $0.00 balance on an account discharged in bankruptcy. As a result, consumers’ credit reports continue to show outstanding (unpaid) balances, which unfairly indicate that the consumer has a much more extensive level of debt than is actually the case. 

Fortunately, Ohio’s own United States Senator Sherrod Brown is sponsoring a bill in Congress that would require both banks and debt buyers to report a $0.00 balance on accounts discharged in bankruptcy to the major credit bureaus. Under the proposed Consumer Reporting Fairness Act, debtors could also pursue legal action against a bank or credit card company that fails to report the zero balance in a timely manner. 

The bill has garnered significant support from groups including Americans for Financial Reform, the Center for Responsible Lending and the National Consumer Law Center. A statement by the National Association of Consumer Bankruptcy Attorneys, “estimate[s] that more than a million Americans who have gone through the bankruptcy process and have legally discharged debts find that their debts continue to appear on their credit reports. This practice of flaunting the bankruptcy discharge by some of the largest banks in this country is intolerable.”

Several U.S. banks are under investigation for debt-reporting violations, including JP Morgan Chase, Bank of America and CitiGroup. 

If you are considering consumer bankruptcy, or have questions about the process, please do not hesitate to contact the attorneys at Miami Valley Bankruptcy, serving Beavercreek, Xenia and Jamestown, Ohio, by calling (937)262-4789.