There is really nothing pleasant about bankruptcy. Nothing. It’s a public record item, you have to go to court, your assets and bad debts are published for peer review and scorn, and your friends and neighbors stop inviting you over for dinner. OK – that doesn’t happen, but it feels just as badly as if they had.
The one redeeming thing that emanates from a bankruptcy is a release from the financial obligations that are covered within the umbrella of the filing. Now, there are different sorts of bankruptcies that an individual can file – one that liquidates his or her assets completely and fully releases any further obligation in MOST cases ( i.e. – income tax, child support et all exceptions) and one that is essentially as repayment plan that is administered by the court assignee.
For this article – we are concerned only with your credit report POST bankruptcy.
The items that are filed with the bankruptcy ( the list of debts you are seeking protection from) CANNOT be listed as individual bad debts after the filing. They must be reported as part of a bankruptcy proceeding. How does that help you? Well, think of it as a big file folder of problems you’ve had in your past, but that folder is organized neatly and is stored in the spare room you never visit. It’s there, but not really a big part of your present. If you’ve never tried to fix your credit report ( which CAN remove the bankruptcy with equal success as any other negative item) potential lenders are going to see it. But it will be a self contained part of your past history that you have ( hopefully) overcome with a positive payment history subsequently. It is not uncommon for people only two years out of bankruptcy to have strong 700 + credit scores, which allows them to be effectively treated as an A credit risk.
OK , so what should you beware of you are asking, right? I’ll tell you. Often times a creditor will violate this practice and report your delinquency separately, outside of the umbrella of the BK filing on your report. This takes our file folder example above, and adds the equivalent of a bunch of loose paper lying around your house, looking like you have had OTHER problems outside and even since the filing. This can not only spell trouble for your credit score and ability to move on with your life, it can also mean BIG trouble for the creditor doing the reporting.
Why? Well, all the way up to the Supreme Court of the United States, our judicial system has protected and given homage to YOUR right to use the BK laws to move on with your life. And reporting bad debts outside of this filing, which were contained within, is a direct, ( if not intentional) violation of your financial future.
You can handle this yourself. Or, you can call your lawyer. Either way, you need to be aware of the laws that protect you, and the potential punishments for the creditor violating your rights. Once they are made aware, in my experience with others, it is a very quick resolution. But you must get copies of your reports regularly, even innocuous, innocent mistakes like this happen everyday – and people like yourself are the ones who pay. Don’t be a victim. Knowledge is power!
