Your credit score is dropping. Late pays, reduced credit limits. High interest rates. Sometimes even the minimum payments are too high for you to make. You are thinking about filing for chapter 7 bankruptcy. You suspect a bankruptcy is not good for your credit either. You are right, but only to a point.
There is nothing in the law that requires the credit reporting agencies to report your bankruptcy filing. The law requires that if they do it can be for no longer than 10 years.
Sounds long doesn’t it? Not necessarily.
When you re-enter the credit market you can recover your good name in about 3 years. How can you do that? Who wants to give credit to a person who files chapter 7 bankruptcy? Lots of credit card companies and automobile dealers. The first thing that will come in the mail after the notices from the Bankruptcy Court will be letters from the auto dealers. Traditionally the first debt people just out of bankruptcy could get was a car loan
The banks know a few things about you
- You won’t be able to file again for 8 years
- If they can put credit in you hands, you WILL use it
Credit will not come cheap, not initially at least. Shop around. If you take on debt you need to be disciplined. You will need to concentrate on not falling into your old habits with debt. Your bankruptcy filing is a friend who will be with you on your credit report for some time. How you conduct your affairs going forward will determine if it is a good friend.
Bankruptcy does not remove entries from your Credit Report.
Let’s talk about something else entirely about your credit report after bankruptcy. A bankruptcy filing does not remove things from the credit report. I bet you think it is really unfair that first it removes nothing and second it gets reported for 10 years. Normally I will hear from clients after 3 years when they either want to buy a home or refinance a mortgage. They complain that all the debts from their bankruptcy are still on the credit report.
What will the real estate agent or the loan officer tell you? Every time they say it is the attorney’s fault that those entries are still there, and the bankruptcy should have removed them. FALSE. Look at this as a course in Credit Reports 101. Like I said above, there is no law that says anyone has to report your debts. The Fair Credit Reporting Act says that if a company reports your credit history it must be:
- Accurate
- Current and
- Verifiable
You filed for Chapter 7 Bankruptcy. Remember what happened? Right, your debts were discharged. What does that mean for your credit report? Just about every entry on the report shows a balance due, not true anymore, delinquencies, again not true any more, and an amount of available credit, not true also. This means is that almost everything on your credit report is inaccurate, obsolete, and unverifiable. If an entry is any of these things, a successful credit clean up removes it entirely.
Your first order of business after your Chapter 7 Bankruptcy must be to clean up your credit report. It is not an overnight process. It can take months to do right. Most people who have been discharged in bankruptcy do nothing with their credit report. No one even thinks about it until it becomes an issue with a rejected credit application. Then the finger pointing starts. When you point your finger look at the three fingers not pointing. They are pointing back at you. That is who is responsible for your credit report, no one else. Your lawyer might be able to help you, but it is up to you to get the ball rolling.
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