Sometimes, finances can get the better of us. Debt can begin to accumulate, or the economy changes, and you end up in an impossible situation. Filing for bankruptcy can help get you out from underneath the worst of it, and it might seem like an easy solution. However, the record of bankruptcy can hang around.
As unfortunate as it is, bankruptcy can make it difficult to build back what you might have lost. Your credit score inevitably drops after filing for bankruptcy. The presence of it on your record can make it difficult to borrow in the future. However, it is possible to remove it.
Bankruptcy filings indicate personal information about you—like your official name or social security number. As such, any errors in the record can be a cause to expunge the record of bankruptcy.
While this can be difficult, this article explains the essential things you need to know about bankruptcy. We go over its effect on your credit score and how to get it dropped from your record.
Bankruptcy promises to give you a chance to start fresh. But, so long as the record prevents you from recovering your previous credit score, it can be challenging. These sections will outline how to remove bankruptcies from credit reports. With these simple steps, you can clear your record and start fresh.
Different Types of Bankruptcies
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There are many types of bankruptcy. The most common for individuals and small businesses are Chapter 7 and Chapter 13.
The differences between the two are essential to note. They determine your options for how to remove bankruptcies from credit reports. Ultimately, it’s the different maximum duration on your records and the repayment plans that determine how much your credit scores drop.
In both cases, it might be prudent to consult a bankruptcy lawyer or consultant. Legal advisors can help you to understand the details of each plan. Knowing the details of the type of bankruptcy can help in understanding how to contest the procedure. Plus, it will help you assess how bankruptcy affects your credit score in the long run.
A chapter 7 bankruptcy generally involves the selling off of assets to pay off existing debt, also known as liquidation. It can include the loss of property that is not exempt from the bankruptcy relief process. This filing will discharge any debt left needing repayment after liquidation.
Determining what assets you may list as exempt and which debt you can write off can be complicated. As such, we recommend consulting an expert. A chapter 7 bankruptcy can stay on your credit report for up to ten years.
Chapter 13 bankruptcy relief differs from chapter 7 in one crucial way. Often called a ‘wage earner’s plan,’ this chapter allows the debtor to set up a repayment plan to pay back the debt.
Repayment plans include installments over either a three or five-year period. The benefit of this approach is that it may not require the loss of property. This chapter can help prevent foreclosures on homes for debtors.
Like with chapter 7, the details of eligibility and procedure likely require a bankruptcy lawyer’s help. Chapter 13 bankruptcy can last on your credit report for up to seven years.
Credit Score and Bankruptcies
It is almost certain that bankruptcy will lower your credit score quite dramatically. However, there is no exact way to determine by how much. Multiple factors affect the score.
First, credit scoring agencies don’t make their scoring formulas public. Second, the criteria to evaluate customers are also not transparent. And last, credit scoring systems don’t remain the same over time.
On top of this, it is vital to consider which type of bankruptcy you have filed. As mentioned above, both have different terms and implications. Generally, chapter 7 impacts your credit score more than chapter 13. The reason is that chapter 7 has a more substantial impact on creditors rather than the filer. Generally, you don’t pay back all the debt owed. Instead, creditors claim what they can and discharge the rest of your debt.
Since chapter 13 usually allows for more repayment of the debt, the impact on your credit score is less.
The exact impact on someone’s credit score is difficult to determine. However, some estimates put a 130 to 150 point drop as likely for someone with a 680 score. A 220 to 240 drop is possible for an initial score of 780.
While these are only estimates, they show how bankruptcy can hurt your credit score if it is initially high. It should also provide hope for those with lower credit scores as bankruptcy may be a more straightforward process from which you can recover.
Removing a Bankruptcy from Your Credit Report
As stated above, it is challenging to get bankruptcies removed from your credit report, but not impossible. The duration of a bankruptcy on your credit score depends on the type of bankruptcy.
Chapter 7 has a maximum of ten years, and chapter 13 has a maximum of seven years. But, these are only maximums. Since there is no minimum, it is possible to get it removed from your record sooner.
Here is how to remove bankruptcies from credit reports yourself:
- Review your credit report. Look for any errors related to your bankruptcy. If there are any errors, you can file a dispute. Anything from a misspelled name to an incorrect social security number is cause for a valid dispute. Also, it could be something as apparent as the wrong bankruptcy chapter.
- Ask for verification. If you found an error and filed a dispute, but the credit bureaus claim it is accurate, you can file for a verification request. This request means they must verify the information. The credit bureau must respond to your dispute claim within 30 days. If they fail to verify the dispute information or finish the verification within 30 days, you should be able to remove the bankruptcy from your record.
- Contact the Court. Suppose you did the first two steps, and the credit bureaus reply stating they verified the details with the court. This situation may be to your advantage. Courts usually never verify information with credit bureaus, so the courts may be able to issue you with a letter stating this fact. Send this to credit bureaus that claimed they confirmed with the court. When presented with this information, they should drop the bankruptcy from your file.
This guide offers a possible way to remove a bankruptcy record from your credit report. However, it is always best to verify these facts beforehand. Ensure the court you contact doesn’t verify bankruptcy information with credit bureaus and always consider getting expert advice.
Working With Credit Repair Companies
The method outlined above is one path for how to remove bankruptcies from credit reports. However, it can be very complicated and time-consuming. Depending on your situation, contacting the top credit repair companies may be better than attempting to solve the problem on your own.
A credit repair company is a professional organization. They can help remove incorrect or inaccurate items from your record and advise on improving your score.
One of the specialties of these organizations is getting bankruptcies dropped from credit reports. As with any field, it is crucial to contact a trusted company. As bankruptcy cases are public records, some companies may contact you on their own. Make sure to avoid scammers who promise perfect results at no cost. It is common for the vulnerable to find themselves targeted in this way.
Professionals can make the process easier and are knowledgeable about the dispute process. That said, they cannot guarantee results. There need to be legitimate grounds in the form of an error to drop a bankruptcy from a credit report. Therefore, it’s crucial to make sure you are willing for a credit company to take your case and to check the terms of their services.
Starting Fresh Again
Bankruptcy is a life-changing experience. It can be a daunting decision to make. It can be heartbreaking to decide on a path that might mean selling off property and assets. But, it is vital to remember bankruptcy isn’t a failure; it’s a clean slate.
Being able to draw a line under the debts that you held onto can be liberating. It can be a perfect chance to review what happened and figure out how to avoid getting into a similar position. It’s crucial to know how you can best move on from the experience and not have it needlessly remain on your record.
Reviewing and disputing information on your bankruptcy record can help you get it dropped. It can eventually get back your initial credit score and put you back on your feet.
No one deserves to feel haunted by their mistakes or bad luck. Bankruptcy doesn’t need to follow you as you try to build yourself or your business back up. If it’s preventing you from moving on to a more credit secure future, then take the time to figure out how to remove bankruptcies from credit reports. It can be as easy as contacting the right experts or sending a letter to start your credit score recovery.
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