THE NO JOB LIFESTYLEWhat is possible and what is not
Bankruptcy is a public court record, and the Fair Credit Reporting Act allows reporting of it for up to 10 years. Credit repair companies have no authority to change that. If a firm says it knows a trick for wiping out a real bankruptcy, walk away. The federal Credit Repair Organizations Act bars false claims, and the law also sets rules on contracts and payment, so read the terms before you sign anything.
You also hear about a verification method where a dispute is filed claiming the court did not verify the record. Bureaus usually obtain public record data from vendors and not directly from courts, but a court letter saying it does not report to bureaus does not make an accurate record false. Results of this tactic are doubtful.
Errors worth disputing
- The case is not yours: mixed files happen, especially with common names, or with relatives who share a name.
- The dates are wrong: check the filing date and the discharge date with your court papers.
- The status is wrong: a dismissed case listed as discharged, or vice versa.
- It is too old: a case past its reporting limit should drop off.
- Accounts are wrong: debts included in the discharge should show a zero balance and may show as included in bankruptcy.
Clean up the accounts after discharge
This is where many people find real problems. After a discharge, accounts wiped out in the case should report a zero balance, with no new late payments. Check all three reports at AnnualCreditReport.com. If a discharged debt still shows a balance or new late marks, dispute it with the bureau, and send a copy of your discharge order and your bankruptcy schedules listing that debt.
You can get those records from your attorney or from the court, through the PACER system. Note that some debts usually survive bankruptcy, like most student loans, child support and recent taxes. They will not show a discharged status, and that is correct. Secured debts may have their own treatment, depending on whether you reaffirmed.
Rebuilding while it is still listed
The bankruptcy will weigh on your score, but the effect generally lessens over time, particularly if new positive accounts are added. Good first moves are a secured card, a credit builder loan and paying all bills on time. Keep balances low and apply slowly. Be careful with high fee cards that target recent filers, and read the fees first.
Lenders often have waiting periods for mortgages after bankruptcy. FHA generally has a two year wait after a Chapter 7 discharge and one year into a Chapter 13 payment plan with court approval. Conventional loans often call for four years after Chapter 7. Our guide on rebuilding after bankruptcy covers these steps in more depth.
Questions people ask
Can you remove a bankruptcy early by asking the court?
Courts generally do not seal cases for credit purposes, and the bureau may report accurate data until its limit. Dismissed cases can still be reported as well.
Does a bankruptcy disappear exactly on its date?
It usually drops around that time. If it stays past the limit, file a dispute with proof of the filing date.
Does Chapter 13 really drop off earlier?
Under bureau practice, a completed Chapter 13 usually drops off seven years from filing. The law would allow up to 10.