Chapter and The Fair Credit Reporting Act
Declaring a Chapter 7 or Chapter 13 bankruptcy is a great financial option for those struggling with crippling debt - but there may be a few questions that you're asking yourself what exactly happens to your credit score when you declare bankruptcy? How will your credit be affected once your bankruptcy is confirmed? What should you do in order to take advantage of the second chance that bankruptcy gives you?
Luckily, the Fair Credit Reporting Act (FCRA) is there to help curious consumers to shift through any credit confusion. Passed in 1970, the Fair Credit Reporting Act is a law enforced by the Federal Trade Commission that protects the basic rights of credit consumers in the United States. While the FCRA was established to put an end to extreme harassment from creditors and debt collectors, this act also allows consumers to receive one free credit report per year in order to check for any reporting errors that may cause a person's credit score to be lower than usual.
So how does the Fair Credit Reporting Act affect your impending bankruptcy case? Simple under the Fair and Accurate Credit Transactions Act (FACTA), which is a part of the FCRA, you can take the opportunity provided by this act to check your credit report for any errors that can be removed before you file for bankruptcy. this is an important step to take before filing, as you can give the bankruptcy courts a more accurate and error-free record of your debts. If you don't think you need to check your report for errors, think again in a study carried out by the U.S. Public Interest Research Group in 2004, over 79% of consumer credit reports contained some kind of error. you can also use the reports to assess what debts will be written off when you file for a Chapter 7 bankruptcy, or what debts you'll have to repay with a Chapter 13 bankruptcy. regardless of what you'll use your reports for, it's important to get your free copy for your own records.
During bankruptcy, the Fair Credit Reporting Act also protects you from further collection action taken by collectors and lenders. since declaring bankruptcy effectively freezes your debts, the FCRA states that collectors must desist in their collection activity until the bankruptcy is finalized.
The FCRA also contains information as to how long certain negative debts may remain on your credit. most debts remain for up to seven years; however, bankruptcies can stay up to ten years, which gives your credit score significant time to recover. If you are concerned that you won't be able to take out any major loans during this time, no need to worry creditors will usually lend to you, possibly at a higher interest rate in the beginning, once you demonstrate your newfound financial responsibility.
The Fair Credit Reporting Act is there to protect your credit rights, so make sure that you request your free credit report, check for errors and ensure that your rights are enforced before, during and after declaring bankruptcy. after all, filing for bankruptcy can give you that much-needed second chance - so make sure that your credit report is in good condition.
Bankruptcy and The Fair Credit Reporting Act
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