Recovery From Bankruptcy

Did you know that more than 800,000 Americans declare bankruptcy each year? Although bankruptcy has numerous drawbacks, it does provide those with ruined finances with a fresh start. While the majority of bankruptcies stay on your credit report for 7–10 years, there are a number of things you can do to begin rebuilding your credit right away.

You should verify your credit report for inaccuracies before you begin to improve your credit. Verify that your pre-bankruptcy debts have been appropriately listed as "Included in BK" on your credit reports from TransUnion, Equifax, and Experian. Only accurate debts may be reported under the Fair Credit Reporting Act, so if anything is incorrect, get in touch with the credit bureaus. It is best to gradually rebuild your credit history after addressing any inaccuracies in your credit reports. Keep a steady job, practice frugal spending, and make your bill payments on time. 

Consider requesting a secured credit card that can be used sparingly and is repaid every month. Secured credit cards are more often authorized than regular credit cards since they use your savings account as collateral for the credit limit. You can be eligible for a house loan as soon as one to two years after declaring bankruptcy. For accepting borrowers who have filed for bankruptcy, the Federal Housing Administration (FHA) and the Department of Veteran Affairs (VA) have special rules. For instance, two years after a discharge, the FHA would insure mortgages for people who filed Chapter 7 liquidation bankruptcy if the borrower has recovered solid credit (or has chosen not to incur new credit commitments), and has proved that they can handle their financial affairs.

For guidance and support with home buying, you might wish to get in touch with a local support program or a housing counselor who has been approved by the U.S. Department of Housing and Urban Development (HUD). Research your loan alternatives, be aware of your rights, and read the fine print because dishonest lenders occasionally target people who are getting out of bankruptcy.

The accounts with the designation "included in BK" should be erased from your credit report after seven years. Depending on the chapter you filed under, the bankruptcy record itself will be erased after 7–10 years. You can write a letter of protest to the credit reporting companies to have the records deleted from your record if they do not do so automatically.