It is so unfortunate that over half a million Americans declare bankruptcy every year. In case you are one of them, you are probably wondering how soon the bankruptcy will disappear from your credit report. Not only that but also thoughts such as, “Can credit repair remove bankruptcies”
It is sure tough to get into bankruptcy. Let me first highlight the joys that bankruptcy can rob you of.
Consequences of bankruptcy
Maybe a bankruptcy advocate told you that filing for bankruptcy is the best way out of your debt problems. It is true that bankruptcy can give you some slight sigh of relief during a financial crisis. You should, however, be aware of the following 5 major consequences of filing a bankruptcy.
You may think that being excused from your debts is the best solution to hard financial times. Once you file for bankruptcy, you remain marked for the next seven to ten years. Then every person or institution you turn to for credit sees that you were bankrupt a year or two back. Are they likely to trust you again?
2. The whole world, or at least America, will know you are bankrupt
Bankruptcy, being a legal procedure, becomes a public record once you file it. The public can have access to your bankruptcy details whenever they want to. This is certainly a stain on your name.
By declaring yourself bankrupt, you can get rid of unpaid income tax bills that are over 3 years old, and a number of unsecured debts like medical bills and credit card balances. You will still be required to pay for taxes under 3 years old. Likewise, your student loans will not be erased.
4. Be ready to spend more cash
Funny this is, but that’s how pinching bankruptcy can be. You normally have to hire a bankruptcy lawyer, whose fees are normally high. Depending on whether you are filing for chapter 7 bankruptcy or Chapter 13, you can spend anything between 0 and $3,200. Such amount of money is certainly not readily available to most of the average income earners.
5. Finding a home loan will be very difficult
Any bank or financial institution you approach for some mortgage or the like after being declared bankrupt will really scrutinize your application. And chances are very high that you will be denied. Remember they are in business for profit and would not want to incur any loss.
You have nevertheless found yourself bankrupt. Your credit score is really low because of this. It’s never too late. Let us see how you can remove bankruptcy from your credit score.
Is it possible to remove bankruptcy from your credit report
That is the desire of every bankrupt individual who wants to regain creditworthiness. As earlier mentioned, the bankruptcy will show in your credit report for up 10 years. Is there a way you can remove it before such a long period elapses?
To be frank, it is very difficult to remove bankruptcies before they naturally expire. Good news is that it is still possible, provided you are ready to put in the required effort. Let us dissect this matter further to get a good understanding.
How long does a bankruptcy stay on your credit report
To answer this question, you first need to know the two types of bankruptcies. The two are:
Starting with Chapter 7, these are more common than the second type. They make up close to 70% of the cases each year. Chapter 7 bankruptcies spell out this: Liquidate all my qualifying assets, pay you whatever I can afford, do away with the remaining debt.
These bankruptcies are do not include long term payment arrangements, the reason why they are more popular.
On the contrary, Chapter 13 bankruptcies spell out this: Given more time, I will pay all my debts, provided I’ll not follow the originally agreed upon timelines. A new payment plan is drafted and an assigned trustee oversees it.
The Chapter 13 bankruptcies remain for 7 years on your credit report, whereas Chapter 7 bankruptcies stay for 10 years.
We now move to these two variations – fraudulent and legitimate bankruptcy
The case of fraudulent bankruptcy
Fraudulent bankruptcy may result from acts such as identity theft or clerical error. It may be some cyber criminals or fraudsters impersonated you and got you into this trouble without your knowledge. First, use the PACER system to access your bankruptcy records.
Once you detect such erroneous inclusions in your credit report, move on to file a dispute with the respective credit bureaus. The first step is to ask the court to write a statement verifying that you have no bankruptcy declared.
Of course, be ready to provide any identification documents and other related documents they will require of you. Once you resolve the issue with the court, write a dispute letter to each of the 3 credit bureaus.
In case the credit bureaus find out your name was included erroneously, they will proceed to make changes on your credit report. This normally takes a couple of weeks. Exercise some bit of patience.
This whole process may prove too tedious for some individuals. Don’t fret – the credit repair companies are there for you. A carefully chosen company will be able to get out the bankruptcy record from your credit report without you incurring uncalled for expenses.
The case of legitimate bankruptcy
“What if I am legitimately bankrupt?” You ask.
The law still gives you the right to dispute any entry on your credit report. Take time to go through the credit report. Be on the lookout for any errors. The more you detect the better. These will serve as evidence and raise the chance of ridding your credit report of bankruptcies.
What if you do not find any error? I have this to tell you – it pays to try. Send a request letter requiring the credit bureaus to verify whether the inclusion of bankruptcy in your credit report is correct.
Wait for their response. If luck is not on your side, the credit bureau will say they obtained the information from the court. End of the tunnel? No!
Take your battle to the court. Your objective here is to unearth some loophole in the process so that the credit report is stripped of the bankruptcy element.
Again, let me point out that you are simply chancing. Not all victims have succeeded to remove bankruptcy from their credit reports. Who said you cannot be the 1 % of the successful ones? Trying is definitely better than sitting down and staring at a low credit score for 10 years.
The credit bureaus are definitely not on your side. I am pretty sure you have visited some of their online platforms. From their perspective, it is next to impossible to remove bankruptcy from your credit report.
I must disclose here that they harbor some ulterior motives. This they do under the cover of shielding you from scammers – that is the credit repair companies. Do not buy their fallacies. It is definitely possible.
In the course of all this, try your best to remain calm in your wording in whatever letter you send. Hardship tends to work you up emotionally. Just restrain yourself from releasing the pain on the wrong person.
A frivolous dispute is a good candidate for shut down by the credit bureaus. They will use your harsh words against you, so play it safe.
Rebuilding credit after bankruptcy
We all learn from mistakes. Do not see your bankrupt state as the end of things. The first thing you would want to do is check your personal finance habits to ensure you do not return to the same spot again.
Allow me to inject this here – quite a lot of people have not yet mustered their spending habits. You will be shocked to realize that the majority of those declared bankrupt are high-income earners. But how did they get into such a financial mess? Failure to plan.
In other words, they planned to fail.
Every individual ought to review their income and use this to plan their spending. Discipline is the key thing when speaking about finances. That simply translates to restraining yourself from purchasing any good or service that stretches your finances, while you could have done without it.
After bankruptcy, purpose to pay all your bills on time. This will, in the long run, reflect in your credit score. Set up funds in good time way before the payment deadlines reach.
Something else I will advise you to do is avoid by all means getting into more debt. Your previous debt might have been scraped off, but racking up additional debt will negatively impact your credit score.
As you seek to repair credit, do not hire any professional services that are out of your reach. Always do a thorough background search of the most affordable, reliable and effective lawyer or credit repair company. Restrain yourself from emotionally subscribing to the most expensive service in a bid to get out of the mess. You will most certainly plunge yourself further into huge debts.
It is my sincere wish that your current bankrupt state will coerce you into soul-searching. Where did I go wrong? What eats up the biggest chunk of my income? Is it worthwhile to spend money on. What if I never spent on such and such a good or service? Would my life still be comfortable? Is it better to stay without that equipment and be stress-free or have that machine and drown in stress?
You will certainly come up with tangible answers which will lead you to a wise approach regarding your expenditure.
How to get credit after bankruptcy
Life must definitely move on. Whether bankrupt or not, you must earn your daily bread. This is sometimes difficult without some loan or credit facility of some kind, to start up that small business and to keep you in the same.
Is there hope?
Yes, for sure. Consider getting a secured loan. The bank, or whatever the lending institution, will require you to make some deposit into a savings account. If you pay them on time, they will forward the positive reports to the credit bureaus, and this is set to improve your credit score over time.
Over time, they will even allow you to take a car loan or a mortgage. As long as you honor your promise of payment, all will work towards your good.
Another possibility after bankruptcy is the secured credit card. With this type of credit card, you are required to pay some upfront fee. You will not be allowed to spend more than the amount you deposited.
The downside of this type of credit card is the high interest rates that come with it. I would therefore advise you to simply use it for a short period as you work on your credit score. Once you attain the required score, start pursuing an unsecured card.
All these good deeds should be reported to the three credit bureaus. The good thing is that they reward without fail.
To wind this up, I will again speak of hope. Bankruptcy can be really devastating. Even so, it is not the end of your financial mastery. The best attitude to develop at such times is the I can attitude. Look at it as the turning of a new page in the story of your life.
Look back to your history and analyze what really went wrong. Let the discovery be a stepping stone to future financial endeavors.
In the case that credit repair does not remove bankruptcy, tell yourself that 7 years is but a short period of time. Hustle through the hard years and you will soon be on your feet again.
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