Residents of Kentucky may be interested in news about the credit rating agency Equifax. A change has been made to the way Equifax rates some people who declare bankruptcy, and the change could help hundreds of thousands of people who have filed Chapter 13.
All three major credit rating agencies, Equifax, Experian and TransUnion, have the same policy for people who file Chapter 7 bankruptcy. Chapter 7 filers, who have most of their debt dismissed, get a flag on their credit report for 10 years. Because Chapter 13 bankruptcy involves payment of some debt, usually over a period of five years, Experian and TransUnion flag Chapter 13 filers for only seven years. However, Equifax treated Chapter 13 filers differently. If a Chapter 13 filer failed to complete their five-year plan, Equifax would add an additional three years to their flag.
Now, Equifax says that policy has changed, and Chapter 13 filers will only be flagged for 7 years, even if they fail to complete repayment and the bankruptcy is dismissed. It is unclear when Equifax changed the policy. The nonprofit news organization ProPublica asked Equifax why it has a different Chapter 13 policy than Experian and TransUnion. The reply from Equifax was that the old policy was changed to match the policies of the other two agencies.
Someone who is struggling to pay their bills may think that choosing debt consolidation is a better option than Chapter 13 bankruptcy because of the negative effect that bankruptcy has on credit rating. There are other differences between debt consolidation and Chapter 13 repayment, primarily that bankruptcy offers certain legal protections that debt consolidation does not. For example, filing bankruptcy immediately puts a stop to all collection efforts. This includes phone calls, wage garnishing, lawsuits and any other effort on the part of debt collectors or creditors to get payment.