Using administrative tax records linked to personal bankruptcy records, we estimate economically small effects of flag removal on employment and earnings outcomes.
Nearly all households that declare bankruptcy file under either Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code.3 Under the Fair Credit Reporting Act (FCRA), credit bureaus are required to remove Chapter 7 bankruptcy flags 10 years after filing. In contrast, credit bureaus traditionally remove Chapter 13 flags only seven years after filing, three years before the Chapter 7 flag is removed. We use this variation in a difference‐in‐differences research design that compares outcomes for Chapter 13 filers (the “treatment” group), whose flags are removed after seven years, to Chapter 7 filers (the “control” group), whose flags are removed after 10 years and therefore are unaffected at the seven‐year time horizon.