After a bankruptcy, your credit should improve within a year. But if you are still lurking in the 500s (credit score) then it is because you did not establish new credit or because there are errors on your credit report. Unfortunately, the errors are complicated so brace yourself because this is a whole lot of info you didn’t know.
#1 What errors happen after a bankruptcy?
The debts you discharged through bankruptcy should report as such, but in many casesthe credit bureaus and the creditors fail to update this information on your credit report. Instead, the accounts continue to be reported as open collection or charge off collection accounts. This is very bad for your credit. But don’t just go disputing information! If the accounts were not discharged, and you still owe the debt, then you are only going to trigger collection efforts- including a lawsuit.
#2 What happens to your credit if just your spouse files bankruptcy?
Did you know that if your spouse files for bankruptcy, but not you, then you are still responsible to the creditors for the debts- even though your spouse discharged them through bankruptcy? Yep. It’s true. Creditors may continue to report the account as an open collection or charge off account, with a past due balance, and update it monthly showing your currently delinquent payment history. Or, best case scenario, the creditors report the debts as discharged through bankruptcy. So if only one spouse is filing bankruptcy to protect the other’s credit- think again. Creditors can report it either way.
#3 But what happens if you get divorced?
This is something that is super tricky. The creditors will come after you for the full debt and you are responsible for paying 100% of it. Worse, unless stated otherwise in your divorce decree, your ex has no liability at all because he or she discharged it. Here is the kicker, if it was reporting as discharged on your credit report- it will be updated to show that it is in collections.
#4 Does it matter to my credit if I file a Chapter 7, 11, or 13?
Yes! How information can be reported when you file a Chapter 7, 11, and 13 differs! If you think there is nothing you can do for your credit during a Chapter 11 or Chapter 13 plan, you are wrong. But it is way too complicated to explain, you have to schedule a free consultation with Rochelle.
These are complicated legal issues that require legal determinations about your liability for debts, and how creditors can report information. We can help. Our legal service programs are 90 days to solve these problems. So why, wait? It is a free consultation.