Do lack of payments report as late while in CH7 BK?

[leonel9]

Here's the situation: I am not currently delinquent with any creditor and have no late payments with anyone. I anticipate filing Chapter 7 near the end of the year when I run out of money, allow sufficient time to pass since the last usage of credit, and have passed the point where my employer's tuition reimbursement check would count toward the means test.

Out of curiosity, after everything is all said and done (i.e. discharge granted), will the lack of payments between my filing date and discharge date be reported as 30-days late, 60-days late, etc.? I know the automatic stay prevents collection activities, but I'm not sure if there's an impact in credit reporting in the time between filing and discharge. It's not the end of the world if they do report, however I'd like to minimize the impact to my credit score so that rebuilding is easier.

Any thoughts/experience/advice would be appreciated. Thanks!

[justbroke]

It is likely that, shortly after the day of filing, your credit account will be summarily closed, the balance zeroed, and the account marked as "included in bankruptcy" (IIB). Creditors typically don't report anything except the actual bankruptcy/charge off sometime after filing (could take 30-60 days to show for a particular creditor on your credit report).

Your credit will be shot just for filing bankruptcy. The accounts that were marked IIB will clearly show other creditors that you discharged debt. However, not all is lost. I had a score in the high 600s (above 670) within a year after discharge of my Chapter 7.

I personally would worry more about keeping my finances in order rather than worry about score recovery. Your score will recover and "could be" in the low 700s within 2 years of filing/discharge. The bankruptcy itself will be there for 10 years (a Chapter 7 is 10, a Chapter 13 is 7 years), and those accounts marked as IIB will be there for 7 years as well (from the date they were marked as IIB). Generally speaking, two years of on time payments, a good credit mix, and not too much new credit (re-establishing your average age of accounts) is what cures this temporary financial wound.

Trust me when I say this... creditors will come out from the woodwork after your case is dismissed/closed! You will have a mailbox full of offers (with higher rates, but still lots of offers). I say to take it slow, get a secured card, establish a very significant savings (6 months of living costs), and learn to just live without credit. Your score will improve like never before.

[bcohen]

My advice is that once you have decided that Chapter 7 bankruptcy is in your near future, quit paying all unsecured debts. Other than being bombarded with collections calls and dunning letters, your creditors won't really be able to do anything to you before the time when you're planning to file. (Of course, you should keep your secured debts current, unless you are planning to surrender the property which the loan secures.)

Any money spent paying toward unsecured debts at this point is money down the toilet. It won't help your credit scores post-bankruptcy, and your creditors will still close the accounts and report them as "included in Chapter 7 bankruptcy". You might as well use the money to take care of any deferred maintenance/repairs to your home or car, any medical/dental needs you have been holding off on, or to stock up on food/medicine, replace worn-out clothes, purchase any other items which fit within your state's bankruptcy exemptions.

In answer to your original question (which really misses the point of how bankruptcy works), while your case is still open, some creditors will report an ongoing delinquency or charge-off status each month that payment is missed. This will appear on your credit report only while the case is still awaiting discharge. Once the discharge is granted, the payment history--good or bad--will be deleted, and all that will remain is "account included in Chapter 7 bankruptcy" and balance $0. Your credit scores following bankruptcy will be determined by how you manage credit after bankruptcy, and are not impacted much by your history before filing. If you obtain a new credit card and use it responsibly, your scores should increase into the mid-600's within a year or two.

[leonel9]

Thank you both for your replies. I appreciate it.

[Janetdoe]

I agree with the above advice to stop paying them. I consulted a multitude of attorneys and they all said it's a waste of money to pay now only to file bankruptcy.