How Bankruptcy Affects Your Credit Score
“Get a fresh start” the bankruptcy attorneys enthusiastically implore you. “Get out from under your debts”, they scream from the hilltops to seduce you into signing on the dotted line that will dash away your debts and troubles. Signing the bankruptcy petition will get you that fresh start that you have been dreaming about for years, right? Well….not so quick.
Hint- It’s Not The Bankruptcy Reporting That Is Holding You Back
Many people think that just because they file for bankruptcy, that they can not ever get credit again. That is simply untrue. For the first couple of years after you file for bankruptcy, credit may be difficult to obtain, but after that it gets easier. The negative effects of bankruptcy on your credit score lessen over time. Here are some things to know if you file for bankruptcy. 1. The time limit for reporting a Chapter 7 is 10 years; 2. The time limit for reporting a Chapter 13 is 7 years. If you file for bankruptcy but don’t complete it, it still stays on your credit report for the above referenced times.
It May Be Your Pre Bankruptcy Creditors & Debt Collectors That Are Holding Your Fresh Start Hostage
The creditors that appear on your credit report may not be as excited about your fresh start as you are. Frequently, they just don’t know how to properly credit report your bankruptcy. For example, some large banks have a tendency to zero out a consumer’s balance when the consumer files for Chapter 13. That’s a huge problem because 35% of your credit score is made up of timely made payments. If a creditor does not report a balance due on your account, there is no balance, then against which to report timely payments. Without recording timely made payments on your account, it is much harder to increase your credit score.
Other times, a credit will not report a tradeline as “included in bankruptcy” or “discharged” in bankruptcy, making it appear that the debt is still open, valid and late. Late payments drag your credit score down. There should be no late payments on pre-petition debts reported on your credit report.
Some Debt Collectors Will Continue To Report An Open Collection Item After Bankruptcy
We have seen a lot of this happen. A debt collector will refuse to report that a collection item on your credit report has been included in your bankruptcy. Mind you, they get notice of your bankruptcy, but look at it and simply toss it aside. Collection items that remain on your credit report after bankruptcy are illegal and can certainly hold your credit score down.
Your Credit Score Does Not Stand a Chance At Recovery If You Do Not Review Your Credit Report & Make Sure That Your Pre Petition Creditors Are Reporting You The Right Way
Your Fresh Start will stay tied to the starting line if you do not review your credit report and make sure that the debt collectors and creditors are reporting your accounts accurately. Bankruptcy alone does not give you a fresh start. You also need a credit report that has everything on it, including the tradelines and collection items, properly addressed.
Our Michigan Credit Repair Law Firm Is Here To Help
If you have filed for bankruptcy, contact us at Michigan Consumer Credit Lawyers. We are happy to review your credit reports for free and give you free advice on how to handle everything that is reporting on it, accurately. You can join our Auto Pilot Program, and have us pull your credit reports every few months to be sure that things on it are reporting accurately as well. Visit us at Michigan Consumer Credit Lawyers. You can also email or call us with questions at [email protected] or call (248) 353-2882.