How do you rebuild credit after a bankruptcy discharge?

What should you check on your credit reports first?

Bankruptcy courts do not report or provide information to credit bureaus, and they are not responsible for verifying what appears in credit reports. So do not assume your reports were updated correctly when the case ended.7

1. Get your reports. You have the right to one free copy each year from each of the three major consumer reporting companies through AnnualCreditReport.com, and the FTC says the three bureaus now let people check each report once a week for free there.8 3
2. Compare each report with the list of debts in your bankruptcy papers. Look for discharged debts that still show a balance you owe, and for entries older than the law allows.9 6
3. Dispute what is wrong with both the credit reporting company and the company that supplied the information. Explain the error in writing and include copies of documents that support you. Disputing is free.1 2
4. Wait for the answer. The credit reporting company must investigate and report the results back to you, and a company that supplied the information generally must investigate and respond within 30 days.1 2
5. If the company decides the entry is accurate and you still disagree, ask the credit reporting companies to add a statement explaining the dispute to your reports.1 2

Why should you keep your discharge order?

The discharge order is the document that proves what the case did. The clerk mails a copy to all creditors, and you receive one too. It does not list which specific debts were discharged, so keep it together with the schedules that list your debts.9

If you lose it, the clerk of the bankruptcy court that entered it can give you another copy for a fee, and it may also be available through the courts' PACER system.9

What if someone tries to collect a discharged debt?

The discharge is a permanent order that prohibits creditors from taking any form of collection action on discharged debts, including lawsuits, telephone calls, letters and personal contacts.9 10

A practical first step is to reply in writing, say that the debt was discharged in bankruptcy, and give the court, the case number and the discharge date. Keep a copy.

If the collection continues, you can file a motion with the bankruptcy court reporting the action and asking that the case be reopened. The court can sanction a creditor for violating the discharge. The normal sanction is civil contempt, which is often punishable by a fine.9

What actually builds credit again?

The CFPB says there is no secret formula for a strong credit score, but there are guidelines that help. None of them is special to bankruptcy.3 4

Remember the debts that survived the case. Debts such as child support, certain taxes and any debt you reaffirmed are still yours to pay, and how you pay them is part of your record from here on.11 12

Read the terms and fees of any new credit product before you apply, and borrow only what you can repay in full. A small cash reserve for emergencies helps you avoid borrowing again.

Can you rebuild credit while a Chapter 13 plan is running?

Partly, and carefully. During the plan you must make the payments to the trustee, and you may not take on new debt without consulting the trustee. Talk to the trustee or your lawyer before you apply for a loan or a new card.13 14

The other steps in this guide work during the plan too: check your reports, dispute errors and pay every bill on time. Missing plan payments is the costly mistake, because the court may then dismiss the case or convert it to Chapter 7.13 14

What can no one promise you?

A timeline, or a score. The CFPB says there is no secret formula for a strong credit score, so be suspicious of anyone who sells a guaranteed result.3 4

No one can legally remove negative information from a credit report if it is both accurate and current. The FTC says it is illegal for credit repair companies to lie about what they can do or to charge before they help, and that a promise to create a new credit identity or to hide a bankruptcy is a scam.3

Time does part of the work. Most negative information can generally be reported for seven years, and a bankruptcy for up to 10 years.15 5 6

Can you be treated differently because you filed?

The law bars some kinds of discrimination that are based only on a bankruptcy. A government agency may not fire an employee, discriminate in hiring, or deny, revoke, suspend or decline to renew a license solely because the person was a bankruptcy debtor or has not paid a discharged debt. A private employer may not fire or discriminate against a worker solely because of the bankruptcy filing.9 16

These protections concern government agencies and employers, not lenders' credit decisions. If you believe you lost a job or a license only because you filed, talk to a lawyer.