Can I Sue a Credit Bureau for Bankruptcy Errors? FCRA Rights and Damages

In general, the court discharges certain debts during approved bankruptcy filings. A credit card debt that was in a charged-off status becomes a “discharged” debt once your bankruptcy is complete.

However, credit bureaus and creditors don’t always update these accounts properly. Not only can this impact your credit score, but it can also make it difficult for you to secure new loans, certain jobs, and even housing.

If this happens, you do have options. Ideally, once you contact the creditor or reporting agency, they will fix the problem. If they don’t, you may have to take legal action against them.

This article explains why these reporting errors occur and what you can do to fix them. This may include a civil lawsuit, FDCPA complaint, or other type of action.

If you recently filed for bankruptcy and your credit report doesn’t reflect that, consider consulting a local consumer protection attorney or bankruptcy lawyer right away.

When Disputes Aren’t Enough

When you first learn a creditor is reporting your debt incorrectly, contact them immediately and demand they fix it. Unfortunately, this isn’t always enough to resolve the issue. Sometimes, no matter how many times you complain or dispute the incorrect entry, nothing happens.

The good news is that the Fair Credit Reporting Act (FCRA) gives you the power to hold creditors and the credit bureau accountable. Depending on the specific facts of your case, you may end up suing for damages or at least filing a complaint with the relevant government agency.

You know that you’ve done “enough” when you can answer “yes” to the below questions:

• Have you tried to resolve the problem the “right way” (disputes)?

• Are the creditors/bureaus ignoring you?

• Do you believe you have legal recourse?

The bottom line is that you don’t have to accept inaccurate credit reporting. There are federal laws that give you the right to sue and recover damages. An experienced consumer protection lawyer can help make that happen.

What Does the Fair Credit Reporting Act (FCRA) Protect?

The Fair Credit Reporting Act protects your right to know what’s in your credit report. It also protects your right as a consumer to expect accurate and updated information about your past and current accounts.

There are several fundamental rights that come from the FCRA, such as the right to the following:

• Accurate information on your credit report

• Reasonable investigation of disputes

• Correction of errors within 30 days

• Deletion of information that the credit reporting agency or creditor cannot verify

• No reporting beyond legal time limits (charge-off date, statute of limitations, etc.)

If you believe someone has violated any of these rights, contact a local consumer rights attorney. Pursuing a legal claim against a creditor, credit bureau, or credit reporting agency isn’t easy. Your odds of recovering damages dramatically increase if you have a skilled attorney handling your case.

Who is Covered Under the FCRA?

The FCRA protects all U.S. consumers. That is a given. You may be wondering who the FCRA governs. The truth is that it applies to any group or entity that reports on your consumer activity.

Some of the groups covered by the FCRA include:

• Credit reporting agencies (Experian, Equifax, TransUnion)

• Creditors who furnish information (banks, credit card companies)

• Anyone who reports to credit bureaus

There are two government agencies that oversee and enforce the FCRA. The first is the Consumer Financial Protection Bureau (CFPB) and the second is the Federal Trade Commission (FTC).

What Constitutes a Violation of the FCRA?

Before we discuss how to file a complaint for an FCRA violation, it’s important that we explain what constitutes a violation of the Fair Credit Reporting Act. If you don’t know whether you have a valid claim, you certainly shouldn’t file legal action against another party.

The following are some of the common types of violations under the FCRA:

• Failing to investigate a dispute – This could involve a credit bureau failing to acknowledge that it received a complaint. This can also happen when the credit bureau or creditor pretends it investigated the matter but, in actuality, did nothing.

• “Rubber-stamping” investigations – Just asking the creditor about the issue and then accepting the creditor’s response that the record is correct

• Refusing to correct verified errors – If the credit reporting agency learns that the error is, in fact, a mistake, it must take the proper steps to correct it.

• Re-inserting deleted information without notice – Not updating records on a consumer’s credit report is one thing. It is entirely different to re-insert incorrect information after you have learned that it is incorrect. This represents willful and intentional behavior on the part of the credit bureau or reporting agency.

• Reporting information they know is inaccurate – It is hard to justify why a credit bureau would report information that it knows is not correct. If your consumer protection lawyer can prove that this happened, you may be able to demand punitive damages.

• Ignoring discharge orders – When a debtor’s bankruptcy is complete, the court discharges any debts included in the bankruptcy. It notifies creditors affected by the discharge. These creditors, in turn, have a duty to report the change in status to the credit bureaus.

If you’re the victim of any of the above behavior, contact a local consumer protection attorney. Depending on the circumstances, you may be able to sue multiple parties for damages.

Common FCRA Violations in Bankruptcy Cases

Even when you don’t file bankruptcy, you may notice false information on your credit report. For example, your report may indicate that a debt collection agency is handling your auto loan. If you are current on your car note, then clearly this is a mistake. Or the report may have the wrong phone number on it.

You can imagine, therefore, how many credit report disputes people file when they have filed for bankruptcy. If a creditor or credit bureau cannot report accurate information when you aren’t in bankruptcy, how can they possibly get it right when the court discharges your debts?

Below, we will discuss some of the more common FCRA claims people file. If you experience any of these (either before, during, or after bankruptcy), you should contact an experienced consumer protection attorney immediately. It can take time to resolve these errors, and the negative impact of credit reporting errors can be severe.

Violation #1: Failure to Conduct Reasonable Investigation

The dispute process for credit report errors is complicated and time-consuming. It is, therefore, extremely frustrating to learn the furnisher of the bad information doesn’t investigate the problem.

Of course, a creditor or credit reporting agency rarely admits that this is what happened. However, after submitting the same dispute several times, you can deduce that this is what took place.

For example, a credit bureau may rely on an automated system that simply asks the creditor whether the information is correct. According to the FCRA, a “reasonable investigation” requires more than rubber-stamping.

Violation #2: Verifying Information That’s Obviously Wrong

Credit bureaus have a duty to maintain, verify, and report accurate credit information. When they fail to do this, they commit an FCRA violation. If you discover that a credit bureau is verifying the balance on an account that the court discharged in bankruptcy, you should dispute it immediately.

When you submit your dispute, attach a copy of your discharge papers. If the credit reporting agency continues to verify an open balance on the account, you can file an FCRA complaint. Since the credit bureau has verified inaccurate information, your claim should be successful.

Violation #3: Reporting Discharged Debts with Balances

Creditors are not allowed to report a balance on a credit account after discharge. For example, a credit bureau cannot report that you owe $10,000 on a discharged credit card. By furnishing inaccurate information, the bureau has violated the FCRA.

Violation #4: Dismissing Disputes as “Frivolous”

When a consumer files a dispute with a credit reporting agency, the agency must investigate the consumer’s claim. If the person investigating the dispute determines that it is baseless, they can close the dispute as being “frivolous.”

When the credit dispute is legitimate, however, the bureau must do a thorough investigation and take the consumer’s claim seriously. If, instead, it marks the dispute as frivolous, it violates the FCRA.

Violation #5: Re-Inserting Deleted Information

If the credit bureau confirms that a dispute has merit, it must make the necessary corrections immediately. However, sometimes, the credit reporting agency re-inserts the incorrect information a month or two later.

Imagine that your credit report shows a balance of $5,000, despite the fact that you included it in your bankruptcy. You notify the credit bureau, and they promptly fix the issue. Six months later, you apply for a car loan, and the finance company denies your application.

The car salesman tells you that they denied your loan because your credit report showed you owing $5,000 on a charged-off credit card. You go online and order your free credit report and see that the $5,000 balance is once again showing.

This is a clear violation of the FCRA as the credit bureau must notify you in writing of the re-insertion and verify that it is accurate.

Violation #6: Reporting Beyond Time Limits

Under federal bankruptcy laws, credit reporting agencies can only report your bankruptcy for a certain period of time. Specifically, credit bureaus can only report a Chapter 7 bankruptcy for ten years and a Chapter 13 bankruptcy for seven years.

If the agency is still reporting your bankruptcy filing beyond these statutory periods, they are in violation of the FCRA.

Do You Have a Valid FCRA Case?

It can be hard to know whether you have a valid FCRA claim. Even if you’re familiar with the Bankruptcy Code, you may not be able to decide whether to pursue a legal claim.

Below is a checklist you can use to determine whether you have a valid FCRA case. We have also included a second checklist that will help you decide how strong your case is. If you answer yes to some or most of these items, it’s time to contact an experienced consumer protection lawyer.

Checklist – You Likely Have a Valid Case If:

✅ You disputed the error in writing at least once (preferably 2-3 times)

✅ You provided proof that the information is wrong (discharge order, court documents, etc.)

✅ The credit bureau “verified” the information is accurate despite your proof

✅ 30+ days have passed with no correction or investigation by the credit bureau

✅ The error is clear and objective (wrong balance, wrong date, wrong status)

✅ You’ve suffered some harm (denied credit, emotional distress)

Stronger Case Indicators

If any of the below statements apply to your situation, then you may have a substantial claim. You don’t want to pursue a claim only to find out that you aren’t entitled to damages. If you can check off any of the below, there’s a good chance you may recover significant compensation.

✅ Multiple disputes over several months

✅ You’ve been denied credit due to the error

✅ Bureau ignored your discharge papers

✅ Error keeps reappearing after removal

✅ Multiple creditors/violations

✅ Bureau marked valid dispute as “frivolous”

If you are still not sure of whether you should move forward with your FCRA claim, seek legal advice right away. The longer you wait to file your dispute, the lower your chance of recovery.

What Weakens an FCRA Case?

While the above statements indicate that you have a strong case, the below checklist contains items that will weaken your case. While it is true that creditors, credit bureaus, and credit reporting agencies have duties under the FCRA, you cannot sit back and do nothing.

Some of the indications that your case may not be strong include the following:

❌ You never formally disputed the credit file in writing

❌ You only disputed the issue once, and it was very recently

❌ The information is actually accurate (you can’t sue to remove a legitimate bankruptcy)

❌ You have no documentation of harm or a violation

Types of Damages You Can Recover

If you sue a creditor, credit bureau, or credit reporting agency and win your case, you will likely recover damages. In some cases, the only benefit you receive for filing legal action is the credit bureau updating its records to reflect the correct status of your accounts.

In most cases, however, you can demand money damages. The specific amount of compensation you’ll receive depends on several factors. Below, we will briefly discuss the different types of damages you can recover from an FCRA violation.

Statutory Damages: $100-$1,000 Per Violation

According to the FCRA, you do not need to prove that you suffered an actual harm to recover damages from a creditor, credit bureau, or credit reporting agency. Under federal law, as long as you can prove the violation occurred, you will receive anywhere from $100 to $1,000 per violation.

The interesting thing about pursuing a claim for an FCRA violation is that you can collect damages for every single violation. For example, imagine that, after your Chapter 7 bankruptcy, three separate creditors fail to update your accounts’ status to “discharged.”

You can demand statutory damages from each creditor for each instance of a reporting error. You can also recover damages from every agency that commits the violation. So, in the above example, you can potentially recover statutory damages from all three creditors, each of the credit reporting agencies that have failed to update the account statuses, and any other party involved in the reporting error.

The judge who oversees your case will decide how much you will receive in damages. Some of the factors the judge will consider include:

• How long the violation continued

• Whether the defendant knew it was wrong

• The number of violations

• Whether the defendant corrected it eventually

Actual Damages: Proven Financial Harm

In addition to the above statutory damages, your attorney can also demand that you be compensated for any actual harm you suffered. To recover actual damages, you will have to prove that you suffered a harm.

Your attorney must also demonstrate a direct connection between the error and the harm you suffered. For example, imagine that a mortgage company denies your loan application based on a reporting error on your credit report.

As a result of the loan denial, you end up renting a house that costs you a lot more than your mortgage payment would have been. You can demand compensation for any additional money you had to spend on rent as a result of the defendant’s reporting error.

Other common examples of how a consumer may suffer harm from an FCRA violation include:

• You ultimately got a loan, but it was at a much higher interest rate.

• You lost your apartment and had to pay thousands of dollars to get into another place.

• A potential employer rescinded a job offer once they did a credit check and saw the inaccurate account information.

• You had to spend money on a credit monitoring service.

• You spent a significant amount of time trying to fix the errors on your credit report.

The best way to understand how damages work in a credit bureau reporting error case is by way of an example. Imagine that you qualified for a mortgage but had to pay 7% interest instead of 5.5% due to a credit score lowered by a reporting error.

On a $300,000 mortgage over 30 years, that’s approximately $100,000 in additional interest you’ll pay over the life of the loan. This comes out to be approximately $100,000 in actual damages.

Emotional Distress Damages

In addition to collecting damages for a financial loss you suffered due to a credit reporting error, you can also demand damages for emotional distress. These damages are hard to prove because they cannot be quantified using receipts and other documentation.

Emotional distress is compensation a plaintiff can recover for mental anguish and stress that results from the defendant’s behavior. It is hard to prove because there is no official paperwork that justifies the amount you demand for emotional distress.

Your personal injury attorney can submit evidence to substantiate your demand for emotional distress damages. Some of the evidence they may offer includes the following:

• Testimony about anxiety, stress, sleeplessness

• Medical records (if you saw a doctor/therapist)

• Prescription medication for anxiety/depression

• Impact on your daily life and relationships

Typically, you can expect to recover anywhere from $1,000 to $10,000, depending on the severity of your distress and the strength of your evidence.

Punitive Damages: Punishment for Bad Conduct

One type of damages that is sometimes available in a civil lawsuit is punitive damages. These are not like ordinary damages. The court will order a defendant to pay punitive damages as a way of punishing them for their egregious behavior.

The judge will only grant you punitive damages if your attorney can prove that the defendant acted willfully or recklessly. Specifically, you must be able to demonstrate that the other party knew (or should have known) that they were violating the FCRA.

Some examples of conduct that would warrant punitive damages include:

• The credit bureau ignored obvious proof that it was not reporting the account accurately (i.e., a bankruptcy discharge order).

• The creditor admitted that the debt was discharged in bankruptcy but continued to report an open balance.

• There is a clear pattern of violations with many consumers.

• Internal emails showing that the defendant knew it was reporting the account incorrectly and didn’t care.

As far as how much you can receive in punitive damages, the answer is – it depends. The more egregious the defendant’s behavior, the more you’ll receive in punitive damages. The point of ordering these damages is to deter the defendant from behaving in the same way in the future.

Attorney Fees and Costs: Defendant Pays If You Win

Some people assume that, whenever you win a civil lawsuit, the other party will have to pay their attorney fees. This is not necessarily the case. However, in cases like this, where the defendant is a big corporation, the courts are more likely to grant punitive damages.

While it’s impossible to say exactly how much you may receive in punitive damages, the average amount ranges from $10,000 to $50,000, depending on the facts of the case and the nature of the defendant’s behavior.

The good news is that, in cases involving dispute errors, there is a better chance that the judge will order the defendant to pay the plaintiff’s attorney fees and court costs.

FCRA Statute of Limitations

As with any other civil case, you only have a certain amount of time to file your legal action. This is because there is a filing deadline (statute of limitations) that you must meet or sacrifice your chance of pursuing damages.

When it comes to cases where major credit bureaus report negative information about a consumer, the statute of limitations typically starts on the day the consumer discovers the error. This is referred to as the “discovery rule.”

Under this rule, the court understands that it wouldn’t be fair for the statute of limitations period to start before the plaintiff knows there is an issue. However, while the court is generous as far as when the clock starts, the maximum filing deadline is five years from the date the error occurs or two years from the date of discovery.

If you don’t file your lawsuit before the statute of limitations period expires, you will lose your chance to pursue damages. The court rarely extends the statute of limitations. It is your responsibility to file your complaint before the deadline passes.

This is why it’s critically important to check your credit report periodically to ensure it has no errors. The only way to ensure your credit report is accurate is to check what is on it. All consumers can access their credit report for free once per year through annualcreditreport.com.

It’s best to explain how the statute of limitations works using an example. Imagine that your bankruptcy discharge is complete in January 2020. You review your credit report in June 2022 and discover that a lender is reporting your account as delinquent when it should show as being discharged. You file a dispute with the credit reporting agency in July 2022.

In this example, you will have until June of 2024 (two years from your discovery of the error) or January 2025 (five years from the date of discharge) to file your lawsuit.

Rather than risk missing your chance to pursue compensation, talk to a consumer protection lawyer right away. They will need time to prepare your case and attempt to negotiate a settlement. If you wait until the last minute, they will not have time to do this.

What Happens After You Win?

You may be wondering what happens after you win your lawsuit. While every case is unique, there are certain things that occur in the weeks and months after the court issues a judgment in your favor.

At a minimum, you should expect the following things to take place after your case is over:

• The defendant should correct your credit report within days

• You should receive a verification letter from the credit bureau/creditor shortly after the case is over.

• You should check for payouts periodically starting a month or so after the judge rules in your favor. Plaintiffs usually receive their settlement proceeds within 30 days of judgment.

Long-Term benefits of Suing the Creditor Bureau or Creditor

Financial compensation is not the only benefit of pursuing legal action against a creditor or credit bureau. There are also long-term advantages to suing a credit reporting agency or creditor for a reporting error.

Some of the benefits include:

• You will have a clean credit report going forward

• You can qualify for credit on better terms

• You will have peace of mind knowing that your credit report is finally accurate

• The error shouldn’t reappear. If it does, you should contact your attorney immediately.

It is true that credit bureaus, creditors, and credit reporting agencies (CRAs) have a duty to report accurate account information. For example, they must report the correct account number and the correct Social Security number. They must also update your account to show a status of “discharged” once your bankruptcy is complete and stop reporting late payments after you file your bankruptcy petition.

Once the other party corrects the mistake, it is your job to make sure these entities report your information correctly in the future. The best way to do this is to engage in ongoing monitoring of your credit file.

You can do this by taking the following steps:

• Keep checking your credit reports (you get a free copy of your report once a year).

• Set up alerts so you know if someone is reporting incorrect information or committing identity theft using your personal information.

• If you notice that the same error reappears, it constitutes a separate violation, and you should sue again.

What to Look for in an FCRA Attorney

If you want to win your lawsuit and rectify any issues with your credit report, it’s crucial that you hire a consumer protection lawyer who can advocate for your rights. This means that you need to find a lawyer who has the essential qualifications to go up against the large corporations on your behalf.

Some of the essential qualifications you should look for include:

• The attorney specializes in consumer rights / FCRA law.

• They have experience with bankruptcy reporting errors specifically.

• The law office takes cases on a contingency basis.

• The lawyer practices in federal court. This is where you must file your lawsuit for a violation of the FCRA.

• The individual has a solid track record of settlements/wins.

There are also certain questions you should ask a potential attorney. This should take place over the phone or during your free initial consultation.

Some of the key questions to ask a prospective consumer protection lawyer include:

• How many FCRA cases have you handled?

• How many involved bankruptcy reporting errors?

• What’s your success rate?

• What do you think my case is worth?

• What’s the typical timeline?

• What’s your contingency fee percentage?

• What do you need from me?

• How often will you update me?

What to Bring to Your Initial Consultation

In addition to asking key questions when you first meet with your attorney, there are also certain things you should bring with you to your free, initial consultation. This will make your first meeting more productive and help you decide whether you want to pursue a legal claim.

To make the most of your time, bring the following things to your consultation:

• All three credit reports (recent)

• Bankruptcy discharge order

• Schedule of creditors from bankruptcy

• All dispute letters you sent

• All responses from bureaus/creditors

• Any credit denial letters

• Timeline of events

• List of damages you’ve suffered

Contact an Experienced Consumer Protection Agency to Discuss Your Options

If you discover credit report errors after you complete your bankruptcy, you may be entitled to damages. Even if you aren’t able to receive financial compensation, you can certainly take steps to correct the issue.

An experienced consumer protection attorney can help determine your options and the best way to proceed. You can even consult a local bankruptcy attorney for help. You just don’t want to wait too long to do this because the longer the incorrect information stays on your credit report, the worse the impact will be.