Bankruptcy Wipes Out Your Debt, Not Your History

What many consumers don’t understand is that while bankruptcy wipes out debt, it doesn’t wipe out the record of that debt.

The bankruptcy itself remains on your credit report, affecting your credit scores, for 10 years. In addition, the negative accounts that were wiped out in the bankruptcy will remain on your credit report. They too will negatively affect your credit scores.

These now inactive accounts should automatically fall off the report seven years after your last payment or last use. If it doesn’t happen automatically, you can file a request to have them removed.

Thus, after 7 years, the only black mark showing will be the bankruptcy, and it will carry less weight from year to year as long as you’ve been working to re-establish credit.

One record that won’t go away – perhaps ever – is your account with a specific vendor. Consider the old adage: “Once burned, twice shy.” This is how vendors feel about customers who have left them with unpaid debt, and this is why they’ll keep a record of your account in their files.

Thus, it’s unlikely that you’ll be allowed to open a new account with a company if you erased your debt to them through bankruptcy. If they do consider extending you credit in the future, it will probably not happen until you’ve begun to re-establish your credit with other vendors. In the case of phone or electric service, cable TV, and satellite service, you may also be required to pay a sizeable deposit.

Is this fair? Of course it is. If you lent money to a friend and they wiped out the debt through bankruptcy, would you be willing to lend them more money?

Is it legal? Yes. Is it discriminatory? No.

The one thing we are allowed to discriminate about is the ability to pay. If any company doubts your ability – or willingness – to pay, they have a perfect right to deny you credit.

What can you do?

Begin rebuilding your credit with other companies. Take out a secured credit card and make all of the payments on time. And most important of all – pay all your bills on time going forward.

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Disclaimer: This information has been compiled and provided by as an informational service to the public. While our goal is to provide information that will help consumers to manage their credit and debt, this information should not be considered legal advice. Such advice must be specific to the various circumstances of each person's situation, and the general information provided on these pages should not be used as a substitute for the advice of competent legal counsel.