Katz and Wulff Attorneys at Law
Life After Bankruptcy
Often when people are evaluating their choices before filing a bankruptcy petition, they are anxious about what filing for bankruptcy relief will do to their ability to obtain credit in the future for things like cars and mortgage re-financing.
A separate federal statute, the Fair Credit Reporting Act (FCRA), regulates credit reporting agencies such as Equifax, Experian and Trans Union, as well as so-called “furnishers” of information to those agencies such as creditors. Under the FCRA, credit defaults can remain on your report for seven (7) years from the date of the first default (missed payment). A bankruptcy filing can remain on the public records portion of your credit report for up to ten (10) years from the date that the bankruptcy petition is filed.
However, the salient question here is this: How long will it be before a prospective creditor, after bankruptcy, will give little or no weight to the bankruptcy filing in making a lending decision? The answer, of course, will vary from creditor to creditor as they all have their own lending criteria. On the whole, however, most creditors will usually ignore a bankruptcy filing that is more than three years old. This assumes two important conditions:
- Your credit report must be accurate. Sometimes a credit card company will report that a debt discharged in bankruptcy is merely “charged off” instead of “discharged in bankruptcy”. “Charge off” is a term meaning that the creditor is no longer actively pursuing collection, but that the debt is still owed. A “charged off” notation is actually more damaging to your credit than the “discharged in bankruptcy” notation, and can hurt your chances of being approved for credit on good terms. The easiest solution is to wait approximately six (6) months after receiving your bankruptcy discharge and then pull your credit report. If you see debts that were discharged notated as “charged off”, call the creditor and have them correct the trade line on the credit report. As provided under federal law, you are entitled to a free copy of your credit report from each of the “big three” credit reporting agencies (Equifax, Trans Union and Experian) and may obtain these by visiting this website: www.annualcreditreport.com.
- Timely payments after bankruptcy. You post-bankruptcy payments to creditors (e.g. car and mortgage debts that your “reaffirmed” in your bankruptcy case) must be made timely. This will accelerate the process of restoring your credit.
You will be able to get credit immediately after bankruptcy, however the terms may be less than favorable for some time. However, if your credit report is accurate and you have made your car and house payments on time after your bankruptcy, your credit should be almost fully restored within three years in most cases. Multiple bankruptcy filings may make it harder to quickly restore your good credit.
