Can You Rebuild your Credit with Bankruptcy?
Believe it or not your credit score may improve after you file for bankruptcy. Most people wait to file a bankruptcy petition after their credit score falls due to accumulated negative marks on your credit report, such as “unpaid,” “past due,” “charged-off”. This is the type of debt that creditors consider unlikely to be collected. In fact, most bankruptcy filers find that their credit scores rise by 30-50 points immediately after filing bankruptcy. While bankruptcy does not erase your credit history, if you file for bankruptcy you can get rid of the burden of insurmountable debt and free you to create a strategy to clean-up your credit and raise your credit score.
How does a bankruptcy show up on your credit report?
Credit reporting agencies should update your credit report soon after you file for bankruptcy. The status of debts that are included on your bankruptcy petition should read “included in bankruptcy.” The length of time it takes the credit bureau to remove a bankruptcy status from your credit report is based on the Chapter of bankruptcy you filed. Specifically, a Chapter 7 bankruptcy can remain on your credit report for 10 years whereas a Chapter 13 remains on your report for seven years. Nevertheless, you can begin repairing your credit despite your bankruptcy status. For a financial fresh start, follow these practical steps:
- Pay debts on time – avoid late payments, this pattern can bring down your credit scores
- Create new credit – creditors will offer you credit cards and other types of credit not long after you file bankruptcy; use these to build new credit
- Balance your income to debt ratio – your credit score drops if you owe more debt than you earn income
Stay up-to-date on your credit report
After successfully completing your bankruptcy case, take the time to review your credit report periodically. Any debts that were discharged through your bankruptcy should not appear on your credit report status as “120 days late” or “charge-off.” A federal law — The Fair Credit Reporting Act — requires the credit reporting bureaus to report consumer debts accurately. An inaccurate entry on your credit is not only illegal, but it may also cause you unnecessary anguish. Dispute any inaccuracies that you find on your credit report immediately.
Contact a skilled Los Angeles bankruptcy attorney to help you re-establish your credit. The Law Offices of Michael Jay Berger has of provided services for over 30 years to people suffering from the weight of excessive debt.