Recovering from Bankruptcy

Recovering from Bankruptcy

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 finances 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 contact 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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All Comments

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2 Contributions
253 People Helped

Helpful to 250 out of 271 people

Bankruptcy is not right for everyone.  You have to make sure that you talk to a reputable bankruptcy attorney.  If you make over a certain amount of money for your household size, you may have to file a Chapter 13.  A Chapter 7 is the quickest relief, but may not be the best option for everyone.  A good attorney will advise you of anything foreseeable, even if it's something you may not want to hear.  My boss has told people before that bankruptcy is not a good option for them.  We would never want to steer anyone in the wrong direction.  We care about the clients where I work.  Also, some people have the misconception that if you file for bankruptcy, you will lose everything which is simply not true.  There are exemptions for homes and vehicles, but they vary from state to state.  The best suggestion that I can offer regarding bankruptcy is to do your homework about what attorneys are reputable and also make sure you disclose everything.  For example, if you do not disclose that piece of property you transferred or your antique car to your attorney, he/she cannot properly advise you and you will most likely end up in a horrible situation with your case trustee.  Although filing for bankruptcy is not fun, if you work with a good attorney, you will feel much better once it's over and you can move on with your life.

1 Contribution
134 People Helped

Helpful to 134 out of 140 people

I filed bankruptcy last year and have already witnessed my credit score go up quite a bit. I know that I have a lot of work to do to ensure that my credit score continuously goes up and to keep it that way. The hard lesson I learned will remain with me forever and I will never allow myself to get into the financial trouble I was in when I filed.

One thing that I would like to comment on for people who are filing or plan on filing soon, be careful like the article states to watch your reports and to make sure that everything that was supposed to be included in your filing is actually taken care of. I received a couple of phone calls from various companies that should have gotten the notice that I filed Chapter 7 and that these accounts were now closed and dissolved but they somehow did not get the notice and called to "work out repayment arrangements", one company of which I talked to on several occasions and finally kindly reminded them that I was legally protected from them calling and harassing me about this debt that was now legally resolved through bankruptcy. I wasn't trying to be rude or anything, but I think they were just trying to manipulate the situation and get some sort of money from me. Luckily after the third time or so they stopped calling after I stopped being so polite :)

Be careful and make sure everything is sorted out. The months after my bankruptcy was completed and I had my Chapter 7 filing in front of me, I kept it right by the phone. If any debt collector called, I would give them my case number and my lawyer's information and that was enough for them (usually) to close the account on their side. 

3 Contributions
436 People Helped

Helpful to 215 out of 238 people

This article is simply and basic I would go to several websites such as www.Bad2GreatCredit.com and others to truly get an opinion of what should be done. Getting a secured card along with verfiying the accuracy of your credit report is just a start. You should also monitor your credit and make arrangements with any creditor that GOOD payment history will encourage them to remove all negative information they have recorded. Also making sure you are aware of who will accept you before you APPLY for Credit Cards and Loans. Making sure you modify the behavior which brought you to bankruptcy also read RICH DAD POOR DAD. Make sure you SAVE ADDITIONAL FUNDS and make sure your debt ratio is below 30% to Gross Income for at least 18 months so as to control your DEBT and increase your savings as the larger your savings account becomes the less likely you are to need your credit which in the long run the less you use it the hirgher it gets. Paying off your secured card every 60 days and not submitting any applications for 12 months will raise your score 100 points as long as nothing is over the limit and you have no other late payments in that time frame.

1 Contribution
55 People Helped

Helpful to 55 out of 57 people

Filed for BK in 2010 was discharged in 2011 then came offers for credit cards. I noticed some offered 36% interest and a $75 first year $99 each year after annual fee oh and a $99 processing fee. Oh yeah these are secured cards btw, THESE ARE RIP OFF ARTISTS taking advantage of people who came upon hard times weather it was thier fault or not... I was semi fortunate to come accross a Cap One offer $300 limit no fee card unsecured, catch 22% interest better than nothing. I do realize i have a BK that will be in reports till 2020. limit raised to $500 6 months later (on time payments) Just approved for 2nd card last night $1000 limit cap one and they were included in my BK. Lets not kid BK is a very serious decision and dont ever want that kind of stress again, but for those of us who have filed or will file please don't be cheated by annual fees or rediculous intesrest! You can start to rebuild your credit with a secured card from a better source, if you dont get an offer for an unsecured card with no fees. BK means you ran into trouble not need to get riped off!

1 Contribution
127 People Helped

Helpful to 127 out of 141 people

I filled lat year. I had lost my job in 2010 like a lot of people. It was determined that at the time of my BK  that I could repay 100% of my debts. I now pay 500.00 a month. Thats more than my payments on my debt. I don't mind paying the money but I feel I should be put in a diferent catigorey when it comes to my credit rating. I could have filed a chapter 7 and had no payments and still had the same results. My credit report just shows a BK and has no notation that I am paying my debts in full.

Anyone else agree with me?

1 Contribution
29 People Helped

Helpful to 29 out of 32 people

I filed Chapter 13 in September 2007 and all my debts were discharged by January 15, 2008. As soon as I got the discharge letter from the judge I was able to buy a car at one of those places that guarantee you will get a loan. The interest is excessive but what do you expect after just declaring bankruptcy? I was able to keep my home and I had a good job. My score is just over 700 and I'm happy with that. I have lots of new credit cards which I use sparingly and pay them off right away. When I retire in a few years, my mortgage will be paid off and I'll be debt free to enjoy my golden years. Getting an experienced attorney is key...don't be ashamed, don't worry another day.....just make the call and do it. You will recover and be able to sleep at night.

1 Contribution
1358 People Helped

Helpful to 1358 out of 1405 people

I had my debts discharged through chapter 7 bankruptcy in December 2008. I immediately got a credit card through Orchard Bank and got a secured loan with my local credit union. In addition I've had to dispute errors a few times on all my credit reports because some of the discharged debts weren't displaying accurately. I've paid off the loan, and I only have a recurring charge on my credit card (my gym membership) and pay the full amount automatically with my bank's online bill pay. As a result, my credit score has gone up 130 points in one year.

Great approach and thank you for sharing with community.

Review by
CK Moderator

1 Contribution
5 People Helped

Helpful to 5 out of 6 people

I filed for Bk-Chapter 7and discharge.in April of 2014.  I cannot get a job.  Now everyone comes after the fact and tells me,  I should have offered to pay off my credits for less than the amount.   At one point 2 people didn't have jobs.  All my jobs involved dealing with money one way or another. I had good credit; however, the balances were high.  Someone told me, do you think someone will hire you to take care of there monies.  When you cannot handle your own finances.  After I thought about that, I understand that people make mistakes.  It would be great if some businesses are a little more understanding and give people with Bankrutcies another chance.   

1 Contribution
35 People Helped

Helpful to 35 out of 43 people

Im about to finish my chapter 13 in march of 2013...I will be so glad..I have struggled in the last 4 years to keep a roof over my family heard and food on the table. even when Im cleared of my bk . i still have to pay off my student debt. I should have not done this..i will be so glad when this nightmare is over...and i will think twiced before letting myself get into this mess...never again

1 Contribution
26 People Helped

Helpful to 26 out of 31 people

 I to went with a debt settlement company to help eliminate my debt.  However I had to pay them up front their fees first before anything started going to my credit cards, which was about 6 months after I started with them.  I was with them for 3 years and was getting nowhere with my credit cards, and my account with the debt settlement company was in a negative state. I would pay them almost $400 dollars a month and like other people my credit cards kept coming after me.  I had lawsuits filed against me and i had to take money out of my 401K to settle some of them on my own. I now have no 401k left.  After 3 years of getting nowhere with them I finally said this is it, im going to file bankruptcy,  not what I wanted to do but it was my last resort.  Also I could never call the person with the debt settlement company, I always had to deal with him through email I don't think that is right.  Anyway i filed in January of 2012 and it has not been completely settled as of yet but I am hopeful.   By reading other peoples stories I feel there is a light at the end of the tunnel

Thank you

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