What does it mean that a bankruptcy is public record?

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In a Nutshell

Anything that you and I can get access to either through a court or another government entity without first getting authorization to do so is considered “public record.” This article will explore what kinds of records a bankruptcy filing goes into and what it means for you.

Written by Attorney John Coble.  
Updated July 22, 2020


This article will explore what kinds of records a bankruptcy filing goes into and what it means for you. 

What Is the Public Record?

Anything that you and I can get access to either through a court or another government entity without first getting authorization to do so is considered “public record.” A common example of information that is part of the public record is real property information. If you own your home, that fact is part of the public record in your home state. An example of what is not a public record are tax returns. Even though they’re submitted to a government agency, the information contained in your tax return can’t be accessed by just anyone without proper authorization. 

Why Is a Bankruptcy Part of the Public Record?

Bankruptcy cases are court proceedings. Court proceedings are always matters of public record unless a judge orders the sealing of the records. It’s unlikely that a bankruptcy judge will order your records sealed, but it’s possible when access to these records could present a threat to your personal safety. You would have a very high burden to prove to the satisfaction of the court that your safety is at risk due to your full court record (as opposed to merely your residential address) being public.

There are parts of your bankruptcy that are not part of the public record. Bankruptcy Form B-21 is the form that contains your full social security number. This is the only information kept on this form. Even your attorney can’t view a record of it through the court’s PACER site, where they have access to all other documents filed in your case. Understand that some of your bankruptcy information is always redacted (blacked out) to protect sensitive information about you. Such redacted information on bankruptcy forms is all but the last four digits of your social security number and financial account numbers. Minor children’s names can only appear as initials. For your birthday, the forms can only show your birth year.

PACER is the federal court system’s electronic case management and electronic filing system. Since bankruptcy courts are part of the federal court system, bankruptcy records are on PACER. You have to register and pay for PACER access. The overwhelming majority of PACER users accessing bankruptcy information are bankruptcy attorneys or their employees. 

There was a time when it wasn’t uncommon for bankruptcy filings to be published in the “legal notices” section of the newspaper. Since the 1970s, as bankruptcies became much more common, such publication has become rare unless it’s a business filing bankruptcy. It’s still rare for businesses unless it’s a business that’s large enough that many peoples’ jobs may be at risk. Even in smaller cities, such publication may take as much as a page of valuable newspaper space. In some small towns, it does still happen.

What About My Credit Report?

Your credit report is not part of the public record. The credit report is private and is only viewable by those you authorize to view it. Your bankruptcy will remain on your credit report for up to ten years from the date of filing. In most cases, when you apply for a loan, you authorize the lender to view your credit report. 

Job Applications

Sometimes, when you complete an employment application, you authorize an employer to view your credit report. This employment authorization is controversial. The following states have passed laws restricting employers’ ability to ask for your credit report in a job application: California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington. Some cities such as New York and Chicago also have restrictions. Regardless of whether an employer can access your credit report, §525 of the Bankruptcy Code prohibits an employer from denying you a job because you filed for bankruptcy.

Jobs Requiring Government Security Clearances

Some government jobs or jobs with private companies that have national defense contracts require government security clearances. These employers may check your credit and may consider bankru ptcy as a factor. The reason is that these jobs have to ensure that you’re not susceptible to bribes from foreign agents. There are cases where failure to file bankruptcy has caused people to lose their security clearance. Since you must have a security clearance for these jobs, the employees lose their job when they lose security clearance. The reason that not filing bankruptcy can lead to this result is that the person would not be susceptible to bribes if they relieve their financial distress by eliminating their debt through bankruptcy. In cases where people file multiple bankruptcies or allow financial problems to linger for years, their security clearance is at grave risk.

Check Your Credit Report After Your Bankruptcy Discharge

It’s important to get your free credit reports a few months after your bankruptcy discharge. You need to check to make sure that debts discharged in your bankruptcy are no longer showing. If some of these debts are still on the report as unpaid and owing, you should contact your bankruptcy attorney or a consumer attorney if you filed your own bankruptcy. This could lead to a claim under the Fair Credit Reporting Act. If you contact the credit reporting agencies to correct items on your credit report, it’s important that you use certified mail. Many credit bureau websites contain arbitration clauses in their terms of use. If you use the credit bureau’s website to dispute an issue on your credit report, you could be giving up your right to a day in court if the credit bureau doesn’t fix an error on your report. 

Is This Rule the Same for Both Chapter 7 Bankruptcy and Chapter 13 Bankruptcy Cases?

The law is the same for both Chapter 7 and Chapter 13 bankruptcies. These are the two different types of bankruptcy specifically for consumers. They can both stay on your credit report for up to ten years. This ten-year period starts from the filing date of your most recent bankruptcy. The three major credit bureaus are Experian, Equifax, and Transunion. All three major credit bureaus show a Chapter 7 bankruptcy on your credit report for the ten years the law allows. But, all three major credit bureaus follow a rule that they will only note a Chapter 13 bankruptcy on your credit report for seven years. In a Chapter 13 that uses a five-year plan, the bankruptcy notation would fall off your credit report only two years after getting your discharge. 

How Does This Affect My Credit Score?

Bankruptcy stays on your credit report for up to ten years. This negative information will impact your credit score, sometimes called your FICO score, less over time. In most cases, a person’s credit score is better within two years after the bankruptcy filing date, than it was the day before they filed bankruptcy. This is because the most important factors in a credit score involve your financial situation. If you’re overwhelmed with debt, you will have a difficult time paying your bills. Bankruptcy fixes this problem. If you take the necessary steps to build credit after your bankruptcy, such as getting a secured credit card, the bankruptcy notation on the credit report will have little impact in most cases. The notation will let lenders know that you can’t file another bankruptcy for a period of time. This actually lowers the risk to the bank considering giving new loans to you. Still, the bankruptcy notation can be a factor when you apply for a mortgage anytime within the first four years after filing. This depends on what type of mortgage you apply for and what type of bankruptcy you filed. Under certain circumstances, a lender will approve a mortgage for you while you're still in bankruptcy.

How Can I Remove a Bankruptcy From My Credit Report Early?

You can’t get the bankruptcy off your credit report until the credit bureau decides to take it off or the ten years allowed by law has run. Some credit repair companies will urge you to file a dispute with the credit bureaus claiming that you never filed bankruptcy. But, it’s very simple for the credit bureau to check and see that you did file bankruptcy. The credit bureaus do have PACER accounts. They can check to see if you have filed bankruptcy in less than thirty seconds. By lying to the credit bureaus, you have lost credibility with them should you have a real dispute. If a credit bureau refuses to fix one of its real errors and you sue it, its lawyers will let the court know that you lied about another error. Judges frown on known liars. Since you may have problems fixing future errors if caught lying, it will be more difficult to rebuild your credit.

Conclusion

Your bankruptcy filing is a matter of public record. It’s unlikely your friends will ever see this record. Those reviewing your loan applications will know that you filed bankruptcy, for a period of seven to ten years. Some employers will know, but more and more states are prohibiting routine credit checks by employers. Any short-term impact caused by negative information on your credit score will be far outweighed by the advantages of filing. Bankruptcy isn’t a way to destroy your credit, rather it’s often the first step to rebuilding your credit.



Written By:

Attorney John Coble

LinkedIn

John Coble has practiced as both a CPA and an Attorney. John's legal specialties were tax law and bankruptcy law. Before starting his own firm, John worked for law offices, accounting firms, and one of America's largest banks. John handled almost 1,500 bankruptcy cases in the eig... read more about Attorney John Coble

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