Life after Bankruptcy: What Banks Don't Tell You.
June 3, 2008
What happens after your bankruptcy has been discharged? How do you make sure that you are going to be able to qualify for decent interest rates on homes, cars, and even credit cards in the future? A bankruptcy stays on your credit report for seven to ten years, but you can get back to a good credit score within a year or two, if you know what you’re doing.
It is illegal for anyone to discriminate against you based on the fact that you have sought protection under the Bankruptcy Code. However, employers and banks can look at your credit report and make a decision based on the information contained therein. Once they see the bankruptcy notation, they are not allowed to make a negative decision based solely on that fact. However, if your credit score has not improved, they can certainly rely on that fact in their decision.
The best thing you can do after a bankruptcy is make sure that your credit score improves. There are several ways to accomplish this, but by far the most important is staying diligent in looking over your credit report. A bankruptcy discharge ends your legal obligation to pay on the debts that have been discharged. This does not mean, however, that all negative insertions come off your credit report; it merely means that they must be reported as discharged, if they were properly included in your filling. If negative insertions are showing up on your credit report that should have been discharged in the bankruptcy, this will result in a slower credit rehabilitation process.
The worst thing that you can have happen after a bankruptcy is to have new negative items show up on your credit report. Taking out new lines of unsecured credit and not paying them on time is a killer. Some negative items may be unavoidable, like a foreclosure. But, in many cases, people file bankruptcy planning to keep their homes. For one reason or another they end up having to surrender the home after the bankruptcy discharge has entered, and then the foreclosure begins. This is not the end of the world but it will slow down the time it takes to rebuild your credit.
Credit reporting bureaus have special procedures for disputing negative items on their reports. I provide my clients with sample letters to use during this process that effectively dispute the incorrect items. If information cannot be verified with a creditor, or can be shown to have been discharged in a bankruptcy, it must be accurately reported.
Once all the negative items are reported accurately, it is time for the next important phase: new relationships with different banks. This step can be the most important one you take. Having a new bank add positive items to your credit report will show the credit world that you are once again worthy of competitive interest rates. The key to remember is that it is up to YOU to get your credit score restored. How? By staying diligent.
