On occasion I will get a call from someone that filed their own bankruptcy without an attorney. For one reason or another, the bankruptcy case didn’t fly and was dismissed by the court. The question is usually this: how do I remove the dismissed bankruptcy from my credit report?
The short answer is “you can’t.” Credit report agencies will likely still report that you declared bankruptcy, including the filing date and also the disposition of the bankruptcy case. In my experience, whether the bankruptcy resulted in a discharge or a dismissal doesn’t matter to the credit bureaus.
This is important. A bankruptcy filing will impact your ability to obtain credit in the short term. I usually advise my clients that the main impact on creditworthiness is during the first two years after filing Chapter 7 bankruptcy.
However, the results can be worse for a person with a dismissed bankruptcy. Not only do they get “negative points” for having a bankruptcy on their record, but they didn’t receive any of the benefits of a bankruptcy discharge. In this way, they are a worse credit risk than a person that was successful in Chapter 7 bankruptcy and obtained a discharge.
Think about it this way: a bankruptcy discharge can in fact be a positive factor for a potential creditor. A discharge means that you do not have as many obligations for your monthly income. A person with a fresh start will be able to better handle any new debt extended to them after a bankruptcy.
The deciding factor for a creditor evaluating a post-discharge debtor for new credit will squarely fall on this: what has the debtor done since receiving a discharge? Have they fallen into bad habits, or are they showing that they can handle their finances appropriately?
My main point is this: if you’re going to go through the trouble of declaring bankruptcy, make sure that you do it right the first time. If you are having trouble deciding whether or how to file bankruptcy, you should consult with an experienced Sacramento bankruptcy attorney for assistance.
Please call my office at (916) 333-2222 for a friendly bankruptcy consultation. My law firm can help guide you through the difficult bankruptcy process from start to finish.