When a creditor charges off a bad debt, this means that it considers the debt to be unpaid for accounting purposes. You still owe the debt and the creditor can still try to collect it, so you can include charge-offs if you file bankruptcy. However, filing bankruptcy will not erase the charge-offs from your credit report.
Credit Reporting
When you file bankruptcy, accounts that were included are listed on your credit report as being discharged in bankruptcy. However, this does not erase the fact that the debt had been charged off before you filed bankruptcy. Both the charged-off bad debt and the bankruptcy will appear on your credit report and will affect your credit score.
Payment History
Not only does a bankruptcy not erase a charge-off, it also does not erase the payment history that led to the charge-off. You likely missed at least a few payments on your debt before it was charged off, and bankruptcy does not do anything to remove these instances from your credit report. They will continue to affect your score just as they would have if you had not filed bankruptcy.
Time Frame
A charged-off debt will drop off of your credit report before the bankruptcy will. This is because most negative information, including charge-offs, can only appear on your credit report for seven years after the date of the charge-off. Chapter 13 bankruptcy also stays on your credit report for seven years, but Chapter 7 bankruptcy stays for 10 years. Therefore, if you had a charge-off and filed bankruptcy one year later, the charge-off would come off your credit report in six years and the bankruptcy would come off one to four years later, depending on whether you filed Chapter 13 or Chapter 7.
Consideration
If your bankruptcy is discharged before a debt is charged off, you can keep it from being noted as a charge-off on your credit report. Instead, the debt will just be listed as included in a bankruptcy, even if it was days away from being charged off. Therefore, if you are planning to file bankruptcy, you can make an occasional payment on your debt to keep it from being charged off in the meantime.
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