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Recovering from Bankruptcy

September 25, 2008

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Every year more than 1.5 million Americans file for bankruptcy for a variety of reasons. While bankruptcy has many negative effects, it does offer people with devastated finances a fresh start. While most bankruptcies remain on your credit reports for 7-10 years, there are several things you can do to start re-establishing your credit after filing.

The first step in managing your credit is to clear your credit reports of errors. Check that your credit reports from TransUnion, Equifax and Experian have accurately recorded your pre-bankruptcy debts as "Included in BK." Under the Fair Credit Reporting Act, you have the right to dispute inaccuracies.
After clearing out any errors in your credit reports it is best to keep a regular eye on your standing and use your credit conservatively. Keep your employment stable, be cautious with spending and pay all your bills on time.
You may want to apply for a secured credit card that can be used in moderation and paid off each month. Secured credit cards use your savings account as collateral for the credit limit and are easier to be approved for than a standard credit card.
As early as 1-2 years after bankruptcy you may be able to receive a home loan. The Federal Housing Administration (FHA) and Department of Veteran Affairs (VA) have specific guidelines for accepting borrowers who have filed for bankruptcy. For example, the FHA will insure mortgages to individuals who have filed Chapter 7 liquidation bankruptcy two years after the discharge if "the borrower has reestablished good credit (or has chosen not to incur new credit obligations), and has demonstrated an ability to manage financial affairs."
You may want to make contact with a U.S. Department of Housing and Urban Development (HUD) approved housing counselor or local support program for advice and assistance with purchasing a home. Unfair lenders can sometimes target people recovering from bankruptcy so be sure to research your loan options, know your rights and read the small print.
After 7 years, the accounts that were marked as "included in BK" should be removed from your credit reports. The bankruptcy record itself will be removed after 7-10 years depending on the chapter that you filed. If your records are not removed by the credit reporting agencies automatically, you can send a letter of dispute to have the records taken off your report.

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as much of this article was information i have heard before it is still a great initial article to read before and right after bk

floraann4651 3 years ago

Good information to know.

ninjarobin 3 years ago

I think its bad to put 7-10 yrs on your credit report..should be like 1-5 yrs

bella82 3 years ago

I filed nearly 10 years ago and look forward to having it off my credit report in March 2009. It has never really hurt my credit score, by the way. Lowest score I have had in 10 years is 670. Current is 756... hmmm?

Shugo 3 years ago

I did it last year, my score is now 695

Vpinch 3 years ago

Bankruptcy is not the end of the world. Avoid it if you can at all cost. After a job loss and poor job market in the area we live in we started working with credit counseling services (be careful)to lower our payments. Although we got some lowered, one of our creitors sent lawyers after us. Our only option was to file. After being discharged for a year now we have a credit score of 697.This is due I beleive to getting a couple of low limit credit cards, using and paying them of each month. You can bounce back, hang in there.

gsiess 3 years ago

how do I rebuild my credit fast and easy. My score is 600. I did a BK.Discharged in aug 08, thnaks

zakman 3 years ago

Whatever you do, try not to default on any payments on credit you earn after the BK. Ours was discharged in 2003. While we were able to purchase vehicles, buy a new home this year (FHA 30-yr fixed rate), and have gotten our scores in the high 600's, it's still hit and miss trying to get approved for credit. We've been fortunate that doesn't carry the stigma it did 10 yrs ago w/ creditors.

meschmidt928 3 years ago

Your credit score will not suffer as badly if you can "reaffirm" certain debts, like a vehicle or a major credit card ( in other words, continue to pay on a couple of debts instead of charging them off ). This also precludes you from having to "re-establish" credit, since you're still paying on already established accounts. My score never went below 690 when I filed under this pretext. Of course, consult a knowledgeable BK attorney to determine viablility of this option for you.

GovyGirl 3 years ago

There are tons of web sites and companies that offer to help you pay down your credit card debt but, it's been my experience they are in it just for the money and have absolutely no clout with your creditors. My case as an example is that I signed up with a "law firm" (which was recommended to me by a co-worker) on line. This law firm is based in California and I later found out is just a bank of operators that switch you from person to person that supply no solid answers. While it seemed a good idea and perfectly logical at the time little did I know (shame on me) that all they provided was a letter to my creditors (on their letterhead) stating I was working with them and trying to pay down my debt. Long story short, one year and $1700 dollars later I realized that not one of my creditors had received a single dime of the $1700. Again shame on me. I was eventually brought to court on several occasions by the creditors and found them to be somewhat sympathectic however they wanted their money and wanted it NOW. After discussing the entire mess with a reputable attorney, bankruptsy was my only option. My debts were discharged in October of 08. I was able to obtain one credit card (on the advise of my attorney) with a limit of $200. I plan to use it wisely and pay it off each month. My score is now at 640 and I have set forth a monthly budget which includes savings. My advise to anyone who is thinking about working with a so called "debt eliminator" is DON'T DO IT. For a small consultation fee (usually around $50-$100) you can consult with a reputable attorney and get some very sound advise. Once you go through a bankruptsy you will never want to go through it again. I hope this story helps someone.

rstlawre 3 years ago