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[B162]Bankruptcy And Credit Score

by Charles Essmeier, Cha

The explanations for a bankruptcy filing can be many - loss of job, sickness, or just a run of bad luck. U.S. law permits individuals who can provide evidence that they simply can't pay their bills the chance to have those debts wiped out in bankruptcy court. Having your obligations relieved is not necessarily easy; there is a price to be paid for getting a new start. The wiped out debts become taxable income. The filing will remain on your credit report for as long as ten years.

There are credit card companies that will extend credit to consumers who have recently emerged from a bankruptcy filing. Companies don't offer credit to the recently bankrupt out of kindness; they know that once you return from court, you can't file again for eight years. Your credit card will be more expensive than the average card, and you'll have to pay greater interest rates, but you can get a credit card after bankruptcy.

Following are some suggestions that might help you raise your credit score following a bankruptcy filing:

Get a major credit card. An account from Chase can help your score more than an account from Your neighborhood bank. The large, national banks aren't going to approve you for an account right away; you will have to start with expensive accounts from small financial institutions. When you can, you should apply for cards from larger banks, as they tend to carry more authority" with the bureaus.

Take the costly charge cards when they are offered and use them with care; you may not have any other choice. Make regular purchases and make the payment promptly. Pay your bill in full if possible, so that you don't have to pay the steep interest rates that the bank will apply to your account.

Ask for a higher limit. Your FICO score is based, to an extent, on the amount of purchasing power available to you. Credit bureaus use something known as a debt-to-credit ratio when establishing a score, measuring how much you owe when compared to how much you can potentially owe. Ideally, you want to owe as little as you can when compared to your total limit. An increase in your limit can contribute to that right away. The higher your limit, the more favorable your ratio.

It is tough recovering from personal bankruptcy, but it is possible. Reestablishing financial competence takes time and effort, but in time, you can do it.

A recent court order has required the three major credit bureaus (Experian, Equifax and TransUnion) to clean up the credit reports of millions of consumers who have filed for Chapter 7 bankruptcy protection. What often has happened is that old debt, discharged in the bankruptcy filing continues to appear on individual's credit reports.

The case has come out of the U.S. District Court for the Central District of California and the Honorable Judge David O. Carter has made the ruling. He has given the credit bureaus until today (October 1, 2008) to revamp their systems to handle making the required changes. According to Jane J. Kim of the Wall Street Journal, Experian and TransUnion appear to have already updated their systems. Equifax, on the other hand, has not issued a comment.

In my personal experience as a consumer bankruptcy attorney, I have heard countless horror stories from clients whose credit reports were filled with misinformation. Particularly, discharged debts were not properly updated on the credit bureaus. The creditor, who has just had a debt eliminated, has no incentive to help assist the debtor by reporting the debt as discharged to the bureaus. Under the new court order, the impetus has been placed on the bureaus to make sure that prior debt, discharged in a chapter 7 bankruptcy case, does not show as due and owing.

As a bankruptcy attorney, I always advise about the fresh start that Chapter 7 usually provides. The misinformation on the credit bureaus after the discharge has been a frustrating event that debtors have had to confront. It usually involved a letter writing campaign, disputing the negative items on a credit report that should have been eliminated.

It will be very interesting to see what kind of bounce prior clients receive to their credit score. It could mean a substantial savings when it comes to obtaining future credit. With the credit score being so important today, any increase in the credit score can means thousands of dollars over the course of an auto loan or mortgage.

If you have had a Chapter 7 bankruptcy case within the last ten years, I would recommend obtaining a copy of each of your three credit reports from the major bureaus. This can be done for free at www.annualcreditreport.com. If you are seeing negative information that should have been removed, take the necessary time to dispute that information in writing. By doing so, and with the help of the recent court order, you should see an increase in your credit score.

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Both Charles Essmeier & David Siegel are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Charles Essmeier has sinced written about articles on various topics from Free Credit Report Score, Mortgage and Cars. . Charles Essmeier's top article generates over 49500 views. to your Favourites.

David Siegel has sinced written about articles on various topics from Dental Practice, Bankruptcy Law and Estate Planning. David M. Siegel is the author of Chapter 7 Success: The Complete Guide to Surviving Personal Bankruptcy. He is a member of the American Bankruptcy Institute and currently practices bankruptcy law in Chicago and its surrounding suburbs. Additional informat. David Siegel's top article generates over 6600 views. to your Favourites.