Who Will Know I Filed Bankruptcy?

A lot of people are nervous, frightened, terrified–you pick the word–about who will find out that they filed bankruptcy? We get asked this quite often, and here’s the answer:

Bankruptcy is a court proceeding and, therefore, creates a public record. The fact that a person filed bankruptcy will be available to anyone at the bankruptcy court or anyone who has access to bankruptcy information online. However–and this is key point–this information is not free. You must have a PACER account to obtain bankruptcy information. And you must pay for it. Bankruptcy attorneys like us have access to the system in order to check on our cases and get other information, but other people rarely pay for access to this system. It is highly improbable that your landlord, employer, neighbors or friends spend their time searching and paying for bankruptcy information through PACER, and it’s even more improbable that they visit the courthouse to check bankruptcy records.

Basic bankruptcy information is also available on credit reports. The fact that someone filed bankruptcy will appear on a credit report for 10 years after a Chapter 7 case and for seven years after a Chapter 13 case. So, every time you apply for credit during these time periods, the lender will find out about your bankruptcy. This is not as bad as you think because many, many people have filed for bankruptcy, and bankruptcies diminish in importance as time goes on during the reporting periods. As an example of how bankruptcy doesn’t destroy your credit, here’s what one former client wrote me in June, 2012:

Hi Nick,

I just wanted to let you know that as of 4:30 this afternoon, Frankie and I are homeowners again! We have worked out butts off, and built our credit back up to scores of 770+ and we were able to make it happen again, just shy of the 5 year anniversary of our filing.

I know I have said it before but again, thank you!
[Name withheld here]

Who else will find out about a bankruptcy? Well, notice of a bankruptcy also goes out to every person or company you owe money to. (Note: it will not go out to your employer just because you have a 401(k) loan. A 401(k) “loan” is not really a debt: it’s the withdrawal of your own money from a tax-deferred account).

Information about consumer bankruptcies is also not published in the newspaper. Here in Massachusetts, Banker and Tradesman publishes information about corporate bankruptcy filings, but no paper anywhere that we’ve ever seen of heard of publishes information about individual consumer bankruptcies.

So, what’s the bottom line? Who will know about my bankruptcy? Past and future creditors are usually the only people and companies that will ever know about your bankruptcy.