Credit Repair Program -- Step 4.  Bankruptcy, Lien, and Judgment Notations

The three credit bureaus obtain public records about bankruptcies, liens and judgments in many jurisdictions via computer database transfer.  In other instances, they might hire someone (or a data gathering company) to research public records to locate new bankruptcy filings, liens and judgments.  Often there are errors and mistakes associated with bankruptcy, lien and judgment notations that appear on credit reports due to human error and other reasons.

Generally, a bankruptcy, judgment or lien will appear on your credit report for 10 years.  Judgments can remain on your credit report for ten years or for as long as your state's statute of limitations allows enforcement of judgments, whichever period is longer.  In some states, a judgment can remain on a credit report for 20 years.

Can you get a bankruptcy, lien or judgment notation removed from your credit report?  If the notation is stated accurately, you have no right to dispute it.  However, if it is stated inaccurately, you have the right to dispute it.  Ideally, the bankruptcy notation would be permanently removed because of your dispute because the court failed to respond to the credit bureau's re-verification request, but most of the time, the notation will be corrected or will remain on your credit report even though it is inaccurate.

If you want to try to get a bankruptcy, lien or judgment notation removed from your credit report, ask yourself:

  • Is the bankruptcy, lien or judgment date accurate?
  • Is the type of bankruptcy accurate?
  • Are the dollar amounts accurate?
  • Was the judgment or lien paid, settled or dismissed?
  • Was the judgment obtained without my having been notified of a lawsuit?

If there is anything about the judgment, lien or bankruptcy notation that is inaccurate, you have the right to dispute it.   You are hoping that the court where the judgment, lien or bankruptcy was filed fails to respond to the re-verification request, forcing the credit bureau to remove it from your credit report as they are required under the Fair Credit Reporting Act.  Of course, there is the high probability that the credit bureau will ignore your request and keep the notation on your credit report anyway.

It is almost impossible to get a mortgage loan if you have an unresolved judgment or lien notation on your credit report.  If you can't get a judgment or lien removed from your credit report using the methods above, work out some sort of agreement with the holder so that you can at least get a notation added to your credit report indicating the matter has been resolved.  To do this, you will need a release of lien or satisfaction of judgment recorded in the court where the judgment or lien was filed. You or the other party should send this document to the credit bureau and ask them to insert a notation on your credit report stating the judgment or lien has been satisfied.  Once such a notation is on your credit report, your credit score should increase within a few months.

If you feel that a judgment was obtained against you without you ever being aware that a suit was even filed, you might be able to get the judgment vacated on the grounds that you were not given proper notice.  For example, debt collectors often get a judgment without the defendant ever being aware that a lawsuit was filed.  Often these judgments are for old credit card debt that was no longer collectible due to the statute of limitation on collecting debt. Or, you can settle a judgment for less than its amount.  Judgment or lien holders will often accept as little as 30% of the amount owed as payment in full, particularly if the judgment or lien is old and there is little chance that you will ever pay it in full.  Satisfying the judgment or lien gives you an opportunity to have the record legally removed from your credit report.  How?  After you have paid the judgment or lien, the entry in your credit report is not up-to-date (since it doesn't have a paid or "satisfied" notation).  You now have a legal right to dispute it.  Send a copy of proof of payment to the credit bureau.  They will kick it back to the court where the judgment was awarded (or the lien was recorded).  Hopefully, the re-verification request will be ignored by the court and the entire notation will be removed from your credit report.  See Debt Settlements.

If you can't get a bankruptcy notation removed, start working on rebuilding your credit.  Contrary to popular belief, a bankruptcy isn't going to damage your credit score for the entire 10 year period that it remains on your credit report.  Most creditors will start to forgive you in as little as six months, with the average being after 3 or 4 years, provided you have shown yourself to be a good credit risk since your bankruptcy was discharged.

It is important to note that in the years immediately after you file bankruptcy, your credit score will gradually increase to a point where you have excellent credit.  However, when the bankruptcy notation drops off of your credit report, your credit score plummets.  Why?  Because when the bankruptcy was on your credit report, you were being compared to others who had filed bankruptcy.  Now that you don't have a bankruptcy notation, you start at the bottom again.  So, be aware of the fact that if you do get a bankruptcy notation removed, your credit score might very well plummet.

Next Step:  Step 05: Charge-offs and Late Payments
Credit Repair Steps:   1     2     3     4     5     6     7     8     9     10     11     12     13     14   
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