When a consumer files for bankruptcy, not all accounts may be included in the bankruptcy discharge or repayment plan. Some accounts may remain open and active, particularly those that are current, reaffirmed, or excluded from the bankruptcy proceedings. Properly reporting these accounts ensures compliance with the Fair Credit Reporting Act (FCRA) and helps prevent inaccurate reporting that could unfairly impact the consumer’s credit profile.
Understanding Accounts Not Included in Bankruptcy
An account may be excluded from bankruptcy for several reasons:
- Reaffirmation: The consumer voluntarily agrees to continue making payments on the account despite filing for bankruptcy.
- Non-dischargeable Debts: Certain debts, such as student loans, child support, or some tax debts, may not be dischargeable in bankruptcy.
- Accounts That Were Current: If the consumer had a current account and chose to keep it outside of the bankruptcy, it remains unaffected.
Steps for Reporting an Account Not Included in Bankruptcy
- Maintain the Original Account Status:
- If the account was current before the bankruptcy filing, continue reporting it as “Current” unless payments are missed after the filing.
- If the account was delinquent before the bankruptcy filing, continue reporting the delinquency until payments are made to bring the account current.
- Use Special Comment Codes to Indicate Exclusion from Bankruptcy:
- Apply an appropriate Special Comment Code to indicate that the account was not included in bankruptcy. This helps differentiate it from accounts that were discharged.
- Example codes may include:
- “Reaffirmed Debt” (if the consumer reaffirmed the debt and agreed to continue payments).
- “Not Included in Bankruptcy” (if the account was excluded from the bankruptcy filing).
- Report Payment History Accurately:
- Continue to report on-time payments, missed payments, or delinquencies based on the consumer’s actual payment behavior after the bankruptcy filing.
- Do not mark the account as included in bankruptcy if it was not discharged or reorganized under the bankruptcy terms.
- Ensure Accuracy with the Date of First Delinquency (DOFD):
- If the account had prior delinquencies, the Date of First Delinquency (DOFD) should be reported correctly to determine how long negative information remains on the consumer’s credit report (typically seven years).
- If the account remained current throughout the bankruptcy, then no DOFD update is needed.
- Notify Consumer Reporting Agencies (CRAs):
- Submit updates to all relevant CRAs to ensure that the consumer’s credit report reflects the correct bankruptcy status.
- Consistency in reporting across all major credit bureaus prevents inaccuracies that could lead to credit disputes.
Compliance with the FCRA
The FCRA mandates that credit reporting be:
- Accurate: Ensure that only accounts included in bankruptcy are marked as such, and those not included are reported correctly.
- Complete: Provide all necessary details about the account status, including reaffirmation, non-dischargeable debt status, or exclusion from bankruptcy.
- Timely: Update accounts promptly to reflect the consumer’s current financial obligations.
Impact on the Consumer’s Credit Report
- Credit Score Considerations:
- Accurately reporting accounts not included in bankruptcy can help consumers rebuild credit faster if they continue making on-time payments.
- Incorrectly reporting an account as “Included in Bankruptcy” when it was not could unfairly lower the consumer’s credit score.
- Transparency for Lenders:
- Properly reported accounts provide clarity for future lenders, allowing them to see which accounts were unaffected by the bankruptcy filing.
Conclusion
Reporting an account correctly when a consumer files for bankruptcy—but the account is not included—is crucial for compliance with the FCRA and for maintaining the integrity of the consumer’s credit report. By keeping the original account status, applying appropriate Special Comment Codes, and ensuring accurate payment history reporting, data furnishers can help consumers preserve their credit standing while promoting trust and transparency in the credit reporting system.