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Dismissed Chapter 13 won't go away

Dr. Don TaylorDear Dr. Don,
I saw your column about bankruptcy and credit reports and have to tell you I just got off the phone with Equifax and they will not remove my dismissed Chapter 13 even though it was filed in June of 1995. They say it will come off next June. They also said that if I had a discharge, it would have fallen off after seven years. Doesn't that seem kind of backward? The way it came down, no creditors lost money. I have spent almost 10 years rebuilding my credit and am going to try to refinance my house early next year. What is your advice?
Thanks,
Andre Application

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Dear Andre,
My earlier reply erroneously stated that a dismissed Chapter 13 bankruptcy, like a discharged Chapter 13 bankruptcy, drops off the debtor's credit report after seven years. Equifax states on its FAQ page (excerpt shown below) that it keeps dismissed Chapter 13 bankruptcies on the consumer's credit report for 10 years.
  • Chapters 7, 11, and non-discharged or dismissed chapters 12 and 13 remain on file for 10 years from the date filed;
  • Discharged chapters 12 and 13 remain on file for seven years from the date filed.

I understand your point that, since you made your creditors whole, waiting 10 years to have the dismissed bankruptcy off your credit report seems excessive, but bankruptcies can be dismissed for a host of reasons, from voluntary dismissals by the petitioner to dismissals with prejudice by the bankruptcy court.

If you haven't done so already, get copies of your credit report and credit score and see where you stand before refinancing your home. You may find that your credit score is high enough to qualify for a mortgage loan at competitive rates without waiting for the dismissal to drop off your credit report.

The Fair and Accurate Credit Transactions Act mandates that you have free access to your credit report, but the act just became effective and the mandated access won't be available nationwide until next fall. A Bankrate feature explains the act and shows when free reports must be available in your state. You'll still have to pay for a credit score.

Since credit scores are based on the information in your credit report, you should see a bump once the bankruptcy dismissal falls off your credit report. For that reason, if you're choosing between refinancing in spring 2005 and refinancing in July 2005, you should consider waiting until after the dismissal drops off your credit report. The risk, of course, is that rates increase while you're waiting and you wind up worse off for having waited despite the improved credit score.

 
-- Posted: Dec. 17, 2004
     

 

 
 

 

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