## Bankruptcy

A bankruptcy filing is a public court record. Credit bureaus report:

- Chapter type (Chapter 7, 11, 12, 13)
  - Chapter 7 and 13 most common
- Filing Date
- Status (e.g., filed, reaffirmed, confirmed, discharged, dismissed)
- Disposition date (when applicable)

The chapter determines how long the bankruptcy remains on a credit report and how lenders typically interpret risk.

## Chapters

### Chapter 7 — Liquidation Bankruptcy

**What It Means:**

- Designed to eliminate unsecured debt (e.g., credit cards, medical bills)
- Non-exempt assets may be liquidated, though many cases are “no-asset”
- No repayment plan
- Fastest bankruptcy type

**Timeline:**

- Discharge typically occurs 3–6 months after filing

**Credit Reporting:**

- Reported as “Chapter 7 Bankruptcy”
- Remains on credit report for up to 10 years from filing date
- Individual accounts included should show $0 balance / included in bankruptcy
- Seen as the most severe bankruptcy type due to full discharge without repayment

### Chapter 13 - Wage Earner/Repayment Plan

**What It Means:**

- Individual agrees to a court-approved repayment plan (3–5 years)
- Used to catch up on mortgages, car loans, or taxes
- Debts are not eliminated immediately

**Key Terms:**

- Confirmed: Court has approved the repayment plan
- Discharged: Occurs only after successful completion of the plan

**Credit Reporting:**

- Reported as “Chapter 13 Bankruptcy”
- Remains on credit report for up to 7 years from filing date
- May show statuses such as:
  - Filed
  - Confirmed
  - Discharged (after plan completion)
- Often viewed more favorably than Chapter 7 because repayment is made

### Chapter 11 - Reorganization Bankruptcy

**What It Means:**

- Typically used by businesses, sometimes high-income individuals
- Debts are restructured through a reorganization plan
- Business usually continues operating

**Key Terms:**

- Confirmed: Reorganization plan is approved and binding
- Discharge: Often tied to confirmation, but depends on plan terms

**Credit Reporting:**

- Reported as “Chapter 11 Bankruptcy”
- Reporting duration varies but is commonly up to 10 years
- Interpretation depends heavily on:
  - Whether the filer is an individual or business
  - Whether the plan was successfully completed

### Chapter 12 - Family Farmer or Fisherman

**What It Means:**

- Specialized version of Chapter 13
- For qualifying family farmers and fishermen
- Allows seasonal or irregular income considerations

**Credit Reporting:**

- Rare, but reported similarly to Chapter 13
- Typically remains for up to 7 years from filing

## Status Terms

- Filed: Bankruptcy case initiated
- Confirmed: Repayment or reorganization plan approved (Ch. 11 / 13)
- Reaffirmed: Removes debt from bankruptcy proceedings (debts a consumer wants to retain e.g. mortgage)
- Discharged: Legal release from qualifying debts
- Dismissed/Removal: Case closed without discharge (generally worse than discharge)

## Bankruptcy Summary

| Chapter      | Purpose          | Repayment?           | Discharge Timing         | Credit Report Duration |
|--------------|------------------|----------------------|--------------------------|------------------------|
| Chapter 7   | Liquidation      | No                   | 3–6 months               | Up to 10 years         |
| Chapter 13  | Repayment plan    | Yes (3–5 yrs)       | After completion         | Up to 7 years          |
| Chapter 11  | Reorganization    | Yes (plan-based)    | Often at confirmation    | Up to 10 years         |
| Chapter 12  | Farmer/Fisher     | Yes                  | After completion         | Up to 7 years          |

## Bloom Bankruptcy Events:

- Filed  
  - Initiates Bankruptcy  
- Removal  
  - Dismissed by Courts or rescinded by Consumer  
- Confirmed  
  - For Chapters 11 or 13, removes Bankruptcy indicator during repayment  
- Discharged  
  - Completion of Bankruptcy  
- Reaffirmed  
  - Removes collateral from Bankruptcy in order to retain debt (e.g. mortgage or car loan)  
- Reaffirm Rescinded  
  - Adds collateral debt back into Bankruptcy  
- Reversed  
  - Reversing a bankruptcy event will bring the consumer to its previous bankruptcy state  
  - If there is no previous bankruptcy state, the bankruptcy will no longer be reported

Nice to know

\* When you report a bankruptcy, it will be reported on all accounts related to that consumer.

- When you discharge a bankruptcy, you can choose which accounts the bankruptcy should be _excluded_ from.

Updated 5 months ago