The following steps are recommendations of how you can begin to get your financial life back on track.
Step 1: Discharge of Debtor
You will receive notification from the court that your debts have been discharged through the bankruptcy. Typically, in a chapter 7 bankruptcy, it will take between 3 to 4 months after the bankruptcy is filed. Once you receive this form, keep it in a safe place for the rest of your life. At some point you may need to show this form to creditors and others as proof that the debts have been discharged.
Step 2: Review your credit report
Before you begin rebuilding your credit score and applying for new credit, you will want to review your credit report and make sure everything is as clean and accurate as possible.
When you first look at your credit report and credit score following your bankruptcy, you will notice that the score has probably dropped by a couple hundred points. This is typical following a bankruptcy. The positive angle is that it has nowhere to go but up from here. Your goal now is to get it above a 720.
Make sure all accounts on the report are accurate and are all actually your debts.
Dispute any accounts you do not believe are accurate, you do not recognize, or you believe legitimately should not be listed on the credit report. The only items that can be removed from a credit report are inaccuracies and accounts that are not yours. Creditors are required to report your history as it actually happened and that is what should be reflected on your report.
Review the credit inquiries on your report.
Make sure you recognize all inquiries being reported and that they are legitimate. Legitimate inquiries will be from the creditors listed in the bankruptcy and any collection agency that purchased the account from the original creditor. Any other inquiry that you did not authorize and that is not from one of your original creditors should be removed.
Get a free copy of your credit report.
You can request a free credit report from all three credit bureaus– Experian, Transunion, Equifax– one time annually. Visit AnnualCreditReport.com to get your free credit reports. These reports do not provide a credit score. If you would like to obtain a copy of your credit report with your credit score, the bureaus will give you the option to do so.
It may take a little bit of work with the bureaus to make certain they are all reporting accurately and the reports are as clean as possible. Experian is the most commonly used credit report, but you will want to make sure all three are as accurate and clean as possible.
Step 3: Update personal information
Updating your basic information is important in reestablishing your credit report. Creditors want to see that you have been in one place for a long period of time. Rental stability is also important. Make sure that your residential history is current and accurate. If there are errors, request that the bureaus fix them immediately. In addition, include your employment history. Creditors like to know you have a stable job. These steps will help improve your eligibility for future credit requests.
Step 4: Accounts showing “discharged in bankruptcy”
You will need to make sure all debts included in the bankruptcy are being reported as “discharged in bankruptcy” and having a zero balance. You do not want these accounts to be showing continual delinquencies going forward. This will damage your credit report and ability to reestablish your credit. The last delinquent payment reported should be the month after you filed your bankruptcy. It may be wise to send a letter to all three bureaus with a copy of your discharge letter, notifying them of the bankruptcy and requesting them to report all debts including in the bankruptcy as “discharged in bankruptcy.”
Step 5: When can items be removed from the credit report?
Generally an account will be listed on your credit report for seven years from the date of the last activity. The last activity is the last date of payment or last date of purchase. Once the time period has passed, you can notify the creditors to have the account removed. Understand the last dates of activity on your accounts so you can have them removed as soon as they are eligible.
Step 6: Verify any new collection activity is accurate
When a creditor determines you are not going to repay them, they “write-off” the account. Typically this means they have sold the account to a collection agency. In many cases the collection agencies handling your delinquent account do not receive proper notification of the bankruptcy from the original creditor. often the collection agency will open a new collection account on your credit report for an account even though the debt was eliminated through the bankruptcy. Make certain that the dates listed on that new collection account reflects the dates listed on the original debt owed and not the date the new collection account was posted. The dates listed on both accounts should reflect the dates from the original debt account. This way the debt will clear your report seven years from the date of last activity and not from the date the account was posted.
Following these several steps is just the beginning to rebuilding your credit report after bankruptcy. This will ensure that your credit report is clean and accurate as you begin the rebuilding process. As you begin to apply for and receive new credit, make sure you make your payments on-time and do not take on more credit than you can handle.
Visit ftc.gov for more information on repairing your credit score.