My client filed a chapter 13 due to divorce (no previous credit issues) and am paying rightly on his repayment plan having several years to go. How should I advise them ways to re-establish his credit and raise his credit score so that when done he’ll be in a strong position. Long before filing his 13, he’d bought a car and making on-time payments. Will that help, but since he can’t use new credit until the payment plan is over, do you have other suggestions or references (other than keep paying on time) that I can suggest or use or do?
Regarding his creditors, he believes his accounts are still open. What should be done regarding those accounts and what the creditors are or are not telling the credit reporting agencies? Can I and should have him to close the old accounts?
Response: Since he is still in Chapter 13, he can’t really do too much in terms of new credit, but you can take several steps to improve what he currently have as a credit consultant
1. I’m sure you have pulled his credit reports from all three credit bureaus. All open accounts should show that they are being paid thru your Chapter 13. If you have any showing a charge off or an unpaid delinquency, you should challenge these erroneous entries pursuant to the Fair Credit Reporting Act requesting that the erroneous reporting be corrected. Debts in Chapter 13 are in payment status and should be reflected accordingly. Sometimes they may be deleted just for challenging them. So don’t say anything about how it should be reported.
2. Do NOT close old accounts. Credit reports are basically historical records and any good credit you have, even if it is old, will help you.
4. Once he is out of the Chapter 13, you should wait about two months, then request copies of all 3 credit bureau reports. All of the accounts paid in the Chapter 13 (such as credit cards and other non-pay direct accounts) should show zero balances. Frequently, we see credit reports post-bankruptcy showing outstanding balances. Once you receive your Chapter 13 discharge, these balances should be zero.
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