The Short Answer
Yes, you can rebuild your credit after bankruptcy — but it takes deliberate steps, starting with reviewing your credit reports. The first and most critical move is making sure every debt included in your bankruptcy is accurately reflected by Equifax, Experian, and TransUnion. If a discharged debt still shows as delinquent or outstanding on your report, it will keep dragging your score down even though you're legally free of it. Getting this right is the foundation everything else is built on — skip it, and the remaining steps won't matter.
It seems that at least once every day when I am sitting in my office going through a free consultation with a potential client I will get the question, “How does bankruptcy impact my credit?” ?So lets go ahead and get this out of the way:
Bad News Alert: Bankruptcy Will Hurt Your Credit Score.
Good News Alert: You Can Rebuild Your Credit.
Anyone who tells you that bankruptcy won’t hurt your credit is lying to you. Bankruptcy will hurt your credit initially. However, if you are interested in filing bankruptcy your credit is probably already damaged quite a bit or is well on its way to being damaged. One of the nice things about bankruptcy is it allows you to hit the “refresh”? button to start over. The question on whether a bankruptcy will hurt my credit is an easy one to answer. Yes. The more important question we should really be asking is: Can you rebuild your credit after filing bankruptcy and, if so, how? Yes, you can rebuild your credit after filing bankruptcy.
I recommend to our clients a six-step process to rebuild your credit. Today, we will discuss the first step.
After you’ve filed your bankruptcy a critical step is to look over your credit report to make sure that the debts that were discharged from your bankruptcy (Chapter 7 bankruptcy) or are included in your repayment plan (Chapter 13 bankruptcy) are reflected accurately on your credit reports. According to the National Credit Reporting Association, in 2002 almost 1 in 4 credit reports had reporting errors!
If you haven’t done so within the last 12 months, you can pull a free credit report at AnnualCreditReport.com. They are one of the few legit places you can pull your credit report without having to pay any money. If you have included a debt on your bankruptcy but your credit report from either Equifax, Experian or TransUnion shows that debt not included in the bankruptcy then you need to correct that. If you don’t, that debt will remain on your credit report as being delinquent or outstanding and will continue to pull down your credit score.
As someone looking for a fresh financial start, it is important that your credit report is accurately reflecting that your debts are either discharged after your Chapter 7 bankruptcy or are being repaid in a Chapter 13 bankruptcy. If you find information is inaccurate then you need to send, in writing, a letter to each of the credit bureaus, attaching a copy of the Report of Filed Claims and the Bankruptcy Discharge Papers, to show that your debts have been included in a bankruptcy. The credit bureaus should correct any of their errors but you will need to be vigilant and persistent to make sure those errors are corrected. If you don’t get this step right then all the steps after this one are moot.
Key Takeaways
- Bankruptcy will hurt your credit initially, but if you're considering filing, your credit is likely already damaged or headed that way.
- After your bankruptcy is filed, pull your free credit reports at AnnualCreditReport.com — the only legitimate no-cost source for all three bureaus.
- Check that every debt discharged in Chapter 7 or included in your Chapter 13 repayment plan is reported accurately by Equifax, Experian, and TransUnion.
- If you find errors, send a written dispute letter to each bureau and attach copies of your Report of Filed Claims and your Bankruptcy Discharge Papers.
- Be persistent — credit bureaus are required to correct errors, but you'll need to follow up to make sure the corrections actually stick.
- Getting your credit report accurate after bankruptcy is Step 1 of 6; without it, every other credit-rebuilding effort is undermined from the start.
Attorney Insight
The mistake I see most often is clients assuming their credit report updates itself automatically once the bankruptcy is filed. It doesn't — and I've had clients come back to me frustrated because a discharged debt was still showing as an active collection account months later, actively tanking a credit score they were working hard to rebuild. In North Carolina, where your fresh start is the whole point of the process, that kind of reporting error can cost you real money in higher interest rates or a denied rental application. Send the dispute letters with your discharge papers attached, and don't stop following up until each bureau confirms the correction in writing.
