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Christine Baker



Credit after Bankruptcy
Updated 11/7/04

The US Supreme Court:

    "One of the primary purposes of the Bankruptcy Act is to give debtors a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt."

Bankruptcy basics
Capital One - Experian credit reporting for an account DISCHARGED in 1996
The "specific" bankruptcy dispute
Legal options

Bankruptcy basics

If you immediately re-establish credit, you can easily have a 700+ credit score 2 years after discharge and get a mortgage as long as you have a good reason for the bankruptcy (unemployment, medical, business failure, etc.)

However, creditors routinely violate the discharge order and continue to report the discharged accounts as charge-offs with delinquent balances.

Even when reported CORRECTLY, 6 year old discharged accounts STILL lower your Fair Isaac credit scores.

I have done some testing at the Equifax site. The before, during, and after dispute Beacon scores clearly indicated that each discharged account costs you a few points. Whenever I have some spare time, I will add more details.  This is an important part of my upcoming law suit against Fair Isaac.

Reporting as charge-off WITH  balances will usually lower the credit scores significantly, and in combination with a RECENT date it will destroy your credit.

This is NOT an occasional credit reporting error, but just about all credit reports with bankruptcies contain discharged accounts WITH balances.

Creditors often continue to access your credit file and possibly lower your credit scores - they do NOT have a permissible purpose after the discharge.

You can demand $1,000 for each violation. The creditor no longer has a valid claim after the discharge. If they were NOTIFIED of your discharge, go get your $$$. Many readers have now received those checks.

Wells Fargo: SETTLED for $1,000 + deletion of UNAUTHORIZED inquiry

If you find any incorrectly reported discharged accounts on your credit reports, contact your bankruptcy attorney for assistance.

Unfortunately, many bankruptcy lawyers are dumb as rocks, couldn't help you if they wanted to and wouldn't help you if they could.  They just don't give a damn.

But, I recently heard about a lawyer who actually resolved his clients' credit problems.

So, call your lawyer and see if he'll help. It's worth a try.

Subscribe to the credit monitoring services.

The on-line credit reports contain more info, you can monitor the progress of your disputes and  you get notified of any re-insertions after deletion.  While I HATE to recommend that you give your $$$ to the credit bureaus, NOT subscribing and disputing will most likely cost you much more if you use credit and insurance.

Lower credit scores can result not only in higher interest rates, but also higher insurance rates and even declines.

If you can't pay your bills and you qualify for discharge of your debts, you should probably do so - avoid the credit counseling services like the plague.

Do NOT sign up with any of these "non profit consumer credit destruction services."

Whether it's Genus, MyVesta or any other fake non profit, they all get paid by the creditors. Usually creditors give 10% of your payments back to those agencies, in addition to your "voluntary" contributions.

Joining one of those programs often results in lower credit scores than if you discharge your debts. Not only are you out the cash you give them, but you destroy your credit with late payments and "consumer credit counseling" notations. While those CCC notations are ignored by FICO credit scores, many creditors rate those notations similar to bankruptcy.

The most outrageous credit counseling disaster is posted at 34 payments to Genus - interest ONLY!!!???? (Capital One - NCO)

Even after complaints about Capital One with the Federal Reserve Bank, the BBB and a complaint to the Capital One CEO, they STILL

  • claim that only interest was paid
  • demand $1,000 to settle the accounts
  • refuse to provide accounting
  • destroy the credit by reporting charge-offs with delinquent balances, and upon the latest dispute one account was even re-aged to a CURRENT charge-off.

Just say "NO" to credit counseling - it does NOT pay to pay.

On 2/8/04 I reviewed a Trans Union  FICO report.  Only 24 months after Ch. 7 filing the FICO scores was 726!!!

Make sure you read the FICO Credit Scoring Basics!

Capital One - Experian credit reporting for an account DISCHARGED in 1996

You can NOT tell from this report that the account was actually discharged in 1996.

The June 2002 dispute with Experian: "Please verify All dates and balances."

NOTHING was corrected. How can this be, while the 1996 Ch.7 discharge is reported on this same credit report?

Disputing incorrectly reported accounts

In the first dispute after the bankruptcy I'm tempted to dispute all derogatory accounts as "not my account." That's because a correctly reported "included" account still lowers the credit scores.  I have a policy of not lying and I've struggled with this for a while. Then I noticed that the bureaus blatantly lie in their answers to lawsuits.  So I don't lose any sleep over this. Of course you can also use the Reagan approach:  "I don't recall ...."  Experian's online dispute reads "no knowledge of account."

But, as I've followed my own and many of my clients' struggles to get correct credit reports, I realized that most people have excellent reasons to sue the CRAs after only one or two disputes.  It rarely happens that all 3 bureaus correct all disputed account after the first disputes.  Even after the 2nd disputes there is often at least one creditor determined to report an outstanding balance or re-age an account and cause major damage to the credit scores.

Some judges really frown on "not my account" disputes when the account IS yours, and it can cost you your case. Unless you're absolutely sure that you will not sue, stick with factual disputes.

After the dispute results are in, you can dispute the remaining incorrectly reported accounts through 2nd "specific" dispute.  I'm still reluctant to recommend suing after only one dispute, although there really is no reason not to.  The FCRA doesn't require two disputes.

You could just point out each incorrectly reported date, balance and notation and tell them what it should be right on the reports.  In that case send your "corrected" reports to the bureaus with a "please correct as indicated."  It's a lot of work, and don't forget to make a copy for your records.

I have been sending "specific" disputes with lots of questions.  I'm still hoping to be able to get answers some day, maybe in court.

Sample dispute for the above account:

"I am hereby disputing the credit reporting of the following accounts:

1) Capital One Bank 5291071313973...

On 6/6/02 I disputed this account on-line and I requested that all dates and balances be verified. You subsequently notified me that you verified the account and you made no changes.

a) Please provide your verification procedure: WHO verified, HOW, and WHEN?

b) "Status: Included in bankruptcy/Account charged off. "

The reporting of the account as "charged off" is incorrect. It is a derogatory notation that lowers my credit scores.

My 05-96 bankruptcy filing and subsequent discharge are on this Experian credit report and even this SAME account refers to bankruptcy.

How did you arrive at the conclusion that this charge-off is reported correctly?

c) "Date of Status: 04/2001"

This" Status Date" implies that the account was charged off in 4/2001, which is also incorrect.

How did you arrive at the conclusion that this date is reported correctly?

d) "Status Details: This account is scheduled to continue on record until 5-2003."

This notation indicates that you are aging this account as of 5-1996, and you are reporting it for 7 years.

How does that relate to the "Date of Status: 04/2001"?

e) "Account History: Charge Off as of 4-2001, 3-2001, 12-2000, 7-2000, 6-2000, 5-2000, 6-1996
Discharged Through BK Ch 7, 11, or 12 04/30/2001 to 02/28/2002"

The more recent the date of a charge-off or bankruptcy, the greater the damages to my credit rating. Fair Isaac's credit scoring software deducts more points for more recent derogatory accounts.

I had specifically requested that you verify all dates.

How did your investigator arrive at the conclusion that both the "04/30/2001 to 02/28/2002" bankruptcy and the many charge-off dates are reported correctly?

f) Why don't you have any procedures in place to prevent this type of extremely damaging credit reporting?

g) You are reporting this account in violation of the US Bankruptcy code.

The US Supreme Court:

"One of the primary purposes of the Bankruptcy Act is to give debtors a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt."

Your reporting of this preexisting debt has destroyed this "clear field for future effort."My damages include excessive interest rates, insurance rates and even declines. Even if the account was reported correctly, it would still lower my credit scores.

Why do you ignore this Supreme Court decision?"

Of course they never answer.

So now I make the disputes a little shorter, but it is important to dispute all those incorrect notations and dates.

I hope I'll be able to ask those questions, I'm suing Experian, Capital One and Providian for exactly this type of reporting. The blog of my suit

I settled with Providian in 1/04 and the Experian former AZ affiliate CreditData SW (Merchant Information Solutions) filed a Motion for Summary Judgment and provided me with many documents about the disputes. The judge denied the motion and I'm still waiting to get to discovery, probably sometime in 2005.

Legal options -- if the bureaus verify incorrect data

When creditors verify incorrect data after your bureau disputes, they violate the FCRA and they are liable for your damages.

I address the "after bankruptcy" reporting in the federal law suit I filed on 3/19/03 against all CRAs, Fair Isaac and several creditors, collectors, the FTC, FCC and the Federal Reserve Bank of Richmond.

It is despicable that the bureaus have absolutely NO procedures to prevent incorrect credit reporting and creditors routinely ignore the discharge order.

It's even more despicable that the so-called "regulators" fail to enforce consumer protection laws such as the FCRA and FCBA.

I have found that it's difficult to find an attorney to sue over just one violation and one bureau.  But it's not unusual at all to have an entire list of violations by the time the 2nd dispute results arrive.

Eleanor Chase v. First USA, Trans Union and Equifax
Plaintiff attorney: Bybee -- Cause: FCRA
filed in Phoenix federal district court 1/8/03

First USA re-aged a 1992 discharged account to a 1998 and 2000 collection/charge-off NOT "included" by TU and Equifax. Both CRAs VERIFIED this incorrect reporting after numerous disputes by Chase.

My thoughts on attorneys and Pro Se litigation.

Important note:

I am NOT an attorney. That's why nothing I publish is legal advice.  

Some of the best postings at the Bankruptcy Forum:

For more details on "after bankruptcy" disputes and FICO credit scoring, please sign up at CreditFactors.

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