We ask the CRA’s to re-investigate each of the creditors’ reports that were listed in the bankruptcy, to be sure they are reporting accurately. If they were discharged in bankruptcy, the balance due should be listed as zero, and there should be a notation that the account was “discharged in bankruptcy.”  This is a derogatory item on your credit report, but at least it shows a zero balance. If you don’t do this “re-investigation” or dispute process, it’s possible that the creditors will continue to report a balance due (or just not report anything new), which makes it look like you charged up debt after the bankruptcy, and didn’t pay it. That is worse.

And once it shows discharged in bankruptcy, the item must be removed in 7 years. Not only that, the older that item becomes, the less it hurts your credit score. Not sure how to dispute items on your credit reports? You can go to the web address http://www.myfaircredit.com/s/correcting-your-credit, it tells you exactly how to do it.

Most of the time, it works quite well. If a bankruptcy client pays their bills on time after filing bankruptcy, and uses credit responsibly, their credit scores can recover into the mid 600′s after one year after bankruptcy, and possibly to 700 or so after two years.

We do the credit clean-up for clients, because even though we tell them how to do it, after bankruptcy many of them just either: (1) don’t get around to it; or (2) are just too overwhelmed by going through the bankruptcy, it is just not the most important thing to them at that time. Then when they decide they have to finance a new car, or buy a house, they decide to fix their credit, but unfortunately it can take a long time to work on your credit to get it right.

If you review your credit reports once a year, you can stay on top of the situation. By law, you can obtain free credit reports once per year from https://www.annualcreditreport.com. Review the reports, and follow the instructions to dispute any inaccurate information. Not sure how to raise your credit score? You can purchase your credit scores (they are not free, like your credit reports) at www.myfico.com, and also learn what you need to do to raise your score, and what it holding you back.

If you were turned down for credit, you should receive an “adverse action notice” or similar notice, which may also include your credit score, at no charge to you. Federal law was changed to require this starting in 2011. If you want more information about this, go to http://www.scoreinfo.org.

It takes time to get your credit back, once you have had problems with it, including bankruptcy. Whatever you do, to get your credit score headed in the right direction, make a budget and live on what you make. If you can help it, don’t default on medical bills, cell phones, or other items. But of course you must prioritize your bills, so never put those types of bills ahead of truly important things like housing, transportation, and other necessities of life for your family. There are more important things than a good credit score.

Remember the TV jingle, “Countrywide Is On Your Side” or the other slogans about how great Countrywide was? I liked the one, “NOBODY can do what COUNTRYWIDE CAN!”

Well, it turns out that it was about the truth, but not in a good way. Recently Countrywide (now part of Bank of America) has had to fork over $108 Million in refunds to consumers that it allegedly cheated through fraudulent practices. If you were a customer of Countrywide from 2005 through mid-2008, you may be entitled to a refund.

“It’s astonishing that a single company could be responsible for overcharging more than 450,000 homeowners,” FTC Chairman Jon Leibowitz said. “Countrywide’s unconscionable behavior harmed American consumers on a massive scale and we are proud to be getting every single dollar back to hundreds of thousands of struggling consumers who can least afford to lose the money.”

The FTC’s June 2010 settlement order required Countrywide, which is now owned by Bank of America, to pay $108 million to be used for refunds and barred the company from taking advantage of borrowers who have fallen behind on their payments. The refunds are being distributed to consumers whose loans were serviced by Countrywide between January 1, 2005, and July 1, 2008, and who were subject to the company’s allegedly unlawful practices.

According to the FTC, homeowners who were in default on their loans were charged excessive fees for services such as property inspections, lawn mowing, and other services meant to protect the lender’s interest in the property. Rather than simply hire third-party vendors to perform the services, Countrywide used subsidiaries to hire the vendors. The subsidiaries allegedly marked up the price of the services charged by the vendors – often by 100 percent or more – and Countrywide then charged the homeowners the marked-up fees. The FTC complaint alleges that the company’s strategy was to increase profits from default-related service fees in bad economic times.

Also, in servicing loans for borrowers trying to save their homes in Chapter 13 bankruptcy proceedings, the FTC alleged that Countrywide made false or unsupported claims to borrowers about amounts owed or the status of their loans, and added fees and escrow charges to their mortgage accounts without notice.

In fact, he said he had just refinanced his truck, the one that we reaffirmed in the bankruptcy, at a 4.3% interest rate. He said the banker offered to do it, and he told the banker that he must not have looked at his credit score. The banker looked at his credit score, and it was 680, not too shabby for someone less than a year after a bankruptcy case.

I’m sure it helps that we do a “credit clean-up” for clients at no additional charge after their bankruptcy. We write to the major credit bureaus and ask them to “reinvestigate” or update their records, to properly show that the discharged debts have a zero balance, and show that they were discharged in bankruptcy.

And so long as the client does their part, by paying any reaffirmed or new debts on time, it is not unusual for a client to have a credit score in the mid-600′s after one year, and 700+ after two years.

Now if you are one of those people who are always paying their debts late, or if you default on cell phone contracts or medical bills or something else AFTER the bankruptcy, then your credit will go right straight down again, and all bets or off.

But if you find yourself having to file bankruptcy, and you can keep your bills paid on time on a “going forward” basis, you can rebuild your credit rather quickly. And that’s good news, if you’re looking to buy something on credit, or try to refinance something, like my former client refinanced his truck.

The problem with that was, that unless the Debtor requested a reinvestigation, when they applied for credit years later, it still looked like they owed money to all these places. In fact, it looked like they had incurred new debt after the bankruptcy, and then not paid it, which I understand is even worse on your credit.

My firm has been doing a complimentary “credit clean-up” for clients for several years now, and it has worked rather well. We help our clients order a reinvestigation of credit from all the major credit bureaus, when each client receives a bankruptcy discharge. It requests that all the discharged debts show as a zero balance and that they were discharged in bankruptcy. I’m told it increases clients’ credit scores by anywhere from 25-150 points.

Anyway, for most people that go through bankruptcy, whose lawyer does not do a “credit clean-up” for them, having the old trade-lines still show up can be a major problem. It can keep them from getting credit, car loans, mortgages, all kinds of things.

Finally, someone brought a class action, and Terri White is one of the named plaintiffs.  The credit bureaus have agreed to fix your credit after bankruptcy now, apparently without being asked, and pay some money damages to certain consumers.

Who is covered? If you received a Chapter 7 discharge and your credit report was issued by one of the Defendants between March 15, 2002 and May 11, 2009 (or, for California residents in the case of TransUnion, between May 12, 2001 and May 11, 2009), and the credit report reported debts that were due and owing which were discharged in the bankruptcy.

If this is you, you may be due certain payments, from $20 to $750, depending upon if you can prove that you were denied a job, a mortgage, or other credit by reason of the erroneous credit report(s).

Should you take it? It’s a decision for you and your lawyer, if you have one. Of the $45 Million settlement, the lawyers for the class get $10 Million. Consumers split the remaining $35 Million.

For the official website that describes the settlement in detail, and provides a claim form, go to http://www.bankruptcydischargesettlement.com/.

For a web site that argues against the settlement, and suggests that you may want to object to it, go to http://stopthebankruptcydischargesettlement.com/.

Good luck!

Flowers at Moody Gardens, Galveston Texas

If your credit card debts are delinquent, backed up or behind, or about to get that way, and you think you may be able to pull things out WITHOUT filing bankruptcy, some of the major credit card banks just set up a website that may help you.

The new website is http://www.helpwithmycredit.org/index.php, and it appears to be a useful start at helping people who have credit card trouble. Of course in my opinion, the banks should have done this a long time ago, before the credit card delinquency rate was 10% like it is now, but I applaud them for doing it, anyway.

If you would, check it out and post a comment to tell me what you think of it, and whether it helped you or not.