TransUnion and Equifax Information Services violated the Fair Credit Reporting Act by posting erroneous information on a post-bankruptcy credit report, according to court documents filed in an Illinois federal court.

Mary Ahlers, of East St. Louis, says that the credit reporting companies recorded some debts as delinquent, as opposed to discharged, even after she received a debt forgiveness order that applied to the listed accounts. She blames the companies for not performing a diligent investigation, and then for not deleting or modifying the account data in light of the available information about the accounts. Her lawsuit demands compensation for unspecified out-of-pocket expenses and emotional distress.

Her lawsuit also seeks a court order that forces the companies to amend her credit reports.

How Does Bankruptcy Affect Credit Scores?

The answer to this question surprises many people, because in many cases, a bankruptcy looks better than long-term debt delinquency or adverse actions, like foreclosure or repossession. These negative reports are signals to many moneylenders that the debtor simply gave up and made no effort whatsoever to rectify the situation, and typically, that is probably a fair assessment.

However, if a consumer files bankruptcy, some moneylenders may conclude that something is better than nothing, and at least the debtor made some effort to cure the money problems. This is the same reason that a Chapter 13 (seven years) falls off most credit reports faster than a Chapter 7 (ten years).

As for the information on the credit report, it is often incumbent on the consumer to ensure that the data is accurate and that all discharged debts are listed as such, because as discussed in a previous post, the Supreme Court recently sided with a debt buyer against a consumer. So, it is fair to speculate that courts will show little interest in enforcing the FCRA and other consumer-friendly laws.

Managing Post-Bankruptcy Credit

Remaining current on any remaining secured debts, such as auto loans or home mortgages, is one of the best and fastest way to rebuild credit.

A new credit card may be a good idea as well, as long as it has a low credit line. If possible, obtain a secured card that does not contain a “secured” note on your credit report. Opinions vary as to whether it is best to pay off the entire balance each month to show diligent payment  or carry over a few dollars and allow the bank to make money.

A proactive attitude may be the best way to rebuild credit. Be upfront with future potential moneylenders about your past credit problems, and while they do not need or want to know details, they do need to hear a brief explanation for your filing, such as medical bills or whatever.

Debtors who keep true to these principles, and others that their attorneys suggest, are in the fast lane to credit restoration, while debtors that overlook or ignore them often end up back in bankruptcy court.

Reach Out to Experienced Attorneys

Effective credit recovery is part of a bankruptcy strategy. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.