Credit Traps to Avoid After Bankruptcy
Bankruptcy can be not only financially devastating to your credit, but cause great emotional damage as well. Fortunately, over time, both can improve.
In the meantime, if you have gone through a bankruptcy, here are some traps that sometimes happen that can further damage your credit report or someone else’s.
1. You reaffirmed a debt in bankruptcy that is showing as discharged on your credit report. Creditors, obviously love to see people who repay their debts. Bankruptcies happen. When it does, if you reaffirm any of your debts, it gives a far better appearance to a creditor than simply walking away.
2. You discharged a debt that is not being reported as discharged. This is the reverse of the above. You needed to walk away from your debts, but the credit report is showing that the account is still open with a past due balance.
3. Your spouse did not file bankruptcy on a joint debt, but her credit report is showing that the debt is in bankruptcy. This is a large problem, because if your spouse otherwise has excellent credit, a trade being reported as being included in bankruptcy may leave a lender with the wrong impression that your spouse filed bankruptcy, too.
4. You have continued to make payments on a debt that you have reaffirmed, but the payments are not reflected in your trade line. This is pretty serious. Many times, people like to save their homes so they reaffirm their mortgage loans in bankruptcy. Sometimes, banks fail or refuse to credit the account with the post-bankruptcy payments. This misleads creditors and also depresses your credit score since you are not receiving credit for payments that you have made.
Credit Reporting Statutes of Limitation for Bankruptcy
- A Chapter 13 bankruptcy remains on a credit report for 7 years from the date of filing.
- A Chapter 7 bankruptcy remains on a credit report for 10 years from the date of filing.
- Bankruptcy is a public record. Hence, if one files for bankruptcy and ultimately changes their mind, the bankruptcy continues on the report for the above reporting periods.
- Bankruptcy has the single greatest negative impact on a credit score.