Mar
28
2012

Bankruptcy should not appear in joint account holder’s credit report

Dear Experian,

If there are two people on a loan and one of them files a Chapter 13 bankruptcy, would it report on the other person’s credit that the account is in bankruptcy status since the trustee will be making payments?

- CHS

 

Dear CHS,

When you cosign for a loan, you are agreeing to share full responsibility for the debt. As a result, the account will appear on both your credit report and the other person’s.

There are two components to bankruptcy that can appear in your credit report. The first is the court record of the bankruptcy filing. That public record will appear in the credit report of the person who filed for bankruptcy. A Chapter 13 bankruptcy public record will remain for seven years from the filing date.

The second component is the status of each account included in the bankruptcy. A status is shown with each account in your credit report. For instance, it might say “current” or “30 days late.” The status might be a combination, such as “current, was 30 days late,” meaning it is now being paid on time but had been 30 days late in the past.

The status line for accounts in bankruptcy will state, “Account included in bankruptcy.”

Both the public record and the “included in bankruptcy” status will appear in the credit report of the person who declared bankruptcy, if they included that account in their filing, but neither should appear in your report if you did not declare bankruptcy.

What is reported for you will depend on the status of the account at the time of the bankruptcy filing and how the lender records your obligation for the account in its records. For example, if the account were in a delinquent status or was charged off as a result of the bankruptcy, which will be reported as the account, without reference to the bankruptcy.

If the lender agrees to a reduced payment plan as part of the bankruptcy, they may report the account closed and charged off on your history because you are no longer liable for the debt, but you did not pay it as agreed.

We recommend that you contact the lender and find out exactly how your obligation for the account will be closed out and how that will be reported in your credit history.

Thanks for asking.

- The “Ask Experian” team

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