Remove Bankruptcy After 7 Years

Major credit reporting agencies usually remove bankruptcy after 7 years for Chapter 13 debtors. Wage earners who have faithfully complied with court-ordered repayment plans can rest assured that a once blemished credit report will no longer hinder efforts to seek employment or re-establish buying power. A Chapter 13 proceeding automatically vanishes from the debtor's report 7 years from the date of filing, as if it never existed. The formerly bankrupt consumer is free to apply for future financing without fear of disclosure of the previous proceeding. U.S. Bankruptcy Courts may have derived the seventh year Chapter 13 debtor's release from the Old Testament of the Bible. According to Deuteronomy 15:1-2, "At the end of every seven years thou shalt make a release. And this is the manner of the release: Every creditor that lendeth ought unto his neighbor shall release it: he shall not exact it of his neighbor, or of his brother; because it is called the Lord's release." Anyone who has paid creditors for three to five years through a repayment plan deserves to be released from further financial liability and boost credit scores after bankruptcy.

While filing has its negative connotations, Chapter 13 debtors have an opportunity to start afresh due to efforts to honor responsibility to creditors. Many Chapter 13 debtors live on a strict budget for several years in order to make monthly payments, sometimes enduring a lesser standard of living. A Chapter 13 is discharged when the last payment has been made and debtors can certify participation in an approved financial management course provided by a reputable consumer financial counseling agency.

When credit reporting agencies remove Chapter 13 filings, credit scores after bankruptcy usually rise. To a prospective lender, an individual's score is evidence of credit-worthiness. Scores above 600 indicate financial stability and a good history of repayment. Removing negative information and establishing a consistent payment history can boost scores overnight. Debtors should closely monitor reports after seven years have lapsed to ensure that reporting agencies have removed Chapter 13 discharges. And don't be lured off by companies which promise to remove insolvency before seven years for a fee; these kinds of offers are illegal. Like a scab on a nasty sore, a Chapter 13 proceeding will fall off by itself when it has had sufficient time to heal. If reporting agencies fail to remove bankruptcy after 7 years, debtors have legal recourse. Contact the three major agencies for free reports. Review all entries and determine if detrimental accounts which should have fallen off of the report are still listed. Call the agency which still shows negative entries and request that the Chapter 13 and all of its accompanying debts and judgments be expunged from databanks and reports. While one call should do the trick, if it is necessary to make repeated calls, do so. A debtor's future financial reputation, which negatively or positively impacts consumer scores, is at stake.

Good credit scores after bankruptcy are like a debtor's calling card. They announce to prospective lenders that the former Chapter 13 petitioner is a responsible bill payer who can be fully trusted to repay loans. Consumers may attempt to justify themselves to lenders in letters, emails and phone calls; but the credit score speaks volumes about someone's ability to follow through on promises; and it is right there in black and white. Consumer scores are derived from credit reports and can range from 300 to 900. The median credit score in the U.S. is 675. Scores are based on a proprietary formula (FICO) which takes into account a consumer's payment history, outstanding debts, and the types of current charge accounts.

Scores also reflect the number and frequency of report inquiries. These three-digit scores open doors to new debt-free lives, new homes, new cars, college education, retirement homes, and almost anything a consumer can buy. A good credit score after bankruptcy rebuilds and reverses most of the negative impact of insolvency and puts the debtor on firm financial footing again. When reporting agencies remove bankruptcy after 7 years, the key is to maintain a clean record. While some Chapter 13 debtors may want to go out and celebrate their newly found debt freedom, caution should be exercised. The same financial mismanagement practices that caused debtors to file bankruptcy seven years ago are prone to entangle them again if vigilance is not exercised. Maintain the same standard of living experienced while honoring the repayment plan. Don't be tempted to go out and spend irresponsibly just because credit scores after bankruptcy have gone up. Be frugal, be watchful and be wise about incurring more debt than one's budget can safely handle. And be careful about applying for financing too frequently. Consumer scores reflect the number of inquiries on a report; a large number can quickly lower credit scores which have been improved.

When reporting agencies remove bankruptcy after 7 years, deserving debtors can once again experience the liberty that comes with sound consumer money management. Chapter 13 petitioners who diligently adhere to a court-ordered repayment plan have a second chance to rebuild their lives and boost credit scores after bankruptcy. A word of caution: Debtors who fail to complete repayment plans within the three- to five-year time frame forfeit the right to debt release, unless they are deemed by the court unable to make payment due to illness or chronic unemployment. However, the seven-year debt release mandated by U.S. Bankruptcy Law is a testament to the fairness and impartiality of the American court system which provides debt relief for most consumers ridden with financial woes. Chapter 13 bankruptcy is not a quick fix for indebtedness, but a long range resolution toward financial freedom.

Rebuilding Credit After Bankruptcy

Rebuilding credit after bankruptcy is like a winning a spouse's trust after an incident of infidelity: it takes time to build confidence in the relationship again. And it takes time for creditors to rebuild confidence in consumers who have violated promises to pay. Like an injured spouse, creditors need to see a consistent and faithful payment history to place trust in wayward consumers again. In a debt-deferred society, it's easy to get caught up in the habit of overspending. The lure of shopping malls and sumptuous merchandise is simply too hard to resist. And the knowledge that with one swipe of a little 2x3-inch piece of plastic, cardholders can have almost anything they want is simply mind-boggling. Not to mention the fact that most charge card companies only request minimal monthly payments. Countless consumers get seduced into charge card abuse every year and the road back to respectability can be long and arduous.

The best way of rebuilding credit after bankruptcy and cleaning up a blemished record is to re-establish a good payment history as quickly as possible. Consumers may choose to work with a money management consultant or find a good self-help book on debt reduction at the local library. Debt recovery gurus also recommend obtaining a secured charge card and making and paying for purchases on time. Similar in appearance to unsecured credit cards available after bankruptcy, a secured card is a major bank charge card. The difference is that a secured card is backed by the consumer's funds, which are regularly deposited into a savings account accessible to the card company. Monies are withdrawn from the consumer's savings as the card is swiped for purchases. The advantage of using a secured charge card is the consumer's spending limit is confined to cash available in savings, but can be increased as deposits are made. In addition, issuing companies monitor secured card activities the same way they monitor those of unsecured cards. Through regularly and consistently paying off secured charge card debt, individuals who have gone through consumer debt protection proceedings can begin re-establishing borrowing power.

Once a solid payment history is established with secured funds, most financial institutions will make unsecured credit cards available after bankruptcy to faithful consumers. Debtors shouldn't be surprised to see multiple offers from major card companies pouring in; the word spreads fast when former debtors begin to regain credibility. The Bible speaks about restoration as a reward for faithfulness. In Isaiah 57:18, God promised to restore Israel if they repented from idolatry -- "I have seen his ways, and will heal him: I will lead him also, and restore comforts unto him and to his mourners." Debtors who turn from charge card abuse and excessive spending place themselves in a position to reap the rewards of responsible financial management. Comforts they enjoyed prior to bankruptcy can be restored, as financial burdens are eventually lifted.

When lenders make unsecured credit cards available after bankruptcy, consumers should use moderation to avoid being tempted back into indebtedness. Just remembering the agony of overwhelming debt should be enough to bring an individual back to the realization that conservative consumerism is the best course to take. Consumer counseling agencies recommend establishing a good track record of timely, consistent payments over a minimum period of two years. They assert that lending institutions may extend loans to debtors who have filed Chapter 7, 11 and 13 bankruptcy petitions if financial reports indicate renewed faithfulness. Unsecured credit cards available after bankruptcy are a token of trust extended to responsible consumers.

Another method of rebuilding credit after bankruptcy is to purchase a vehicle at a "buy here, pay here" used car lot. Most of them do not penalize consumers for bad debts and bankruptcies. No, it's not a major auto dealership, and the interest rates may be higher, but individuals can use this type of financing to re-establish a sound car payment history. After bankruptcy, consumers should also ensure that current reports accurately reflect discharged accounts. Go online and obtain free reports and scores from the three major reporting bureaus and review them carefully. Contact them personally to ensure that any discrepancies, such as outdated filings and settled accounts are properly recorded. Timely payments with unsecured cards made available after bankruptcy also contribute to rebuilding positive credit histories. Rebuilding credit after bankruptcy sometimes requires "piggy-backing" off of someone else's good credit. Financial consultants recommend asking a family member or friend to co-sign on a small bank loan and paying it off as quickly as possible. But remember: co-signers are equally liable for unpaid bills; to avoid damaging a co-signer's solvency, faithfully honor loan committments. Financing furniture and appliances on a 90-day-same-as-cash basis also affords an opportunity to demonstrate trustworthiness. Store records will substantiate consistent payments and can be used to validate a former debtor's renewed reliability.

Once good credit has been re-established, take it easy. Consumers will have to take a good hard look at how they've managed money in the past and do away with poor practices before rebuilding credit after bankruptcy. Use unsecured credit cards available after bankruptcy sparingly. Instead of spending money irresponsibly, establish a budget and stick to it. Make entertainment a treat, instead of a routine and plan family nights at home with popcorn and rented videos, instead of going to a movie. Join a warehouse shopping club and buy larger quantities of food, meats and household items, re-packaging them for later use at huge savings. Join a Christmas club plan to save year round for holiday shopping and avoid overusing charge cards. Once credit-worthiness has been restored, be determined not to fall under the seductive spell of impulsive buying again.

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