Tag Archives: bankruptcy

Are New Bankruptcy Laws Going To Help You?

There are 2 sides to the changes in bankruptcy rules. It will be a lot harder to file bankruptcy under chapter 7 and get a totally clean slate.

For businesses, relying on issuing credit, the new personal bankruptcy law is doing great, reducing personal bankruptcy claims from the thousands to double digits. (In the short run).

However, lawyers working with the actual people filing for bankruptcy say that the new law is seriously flawed because it puts more financial burdens on already broke clients and reduces potential debt repayment to small businesses.

And then of course you have the credit card companies charging high interest rates which in quite a few cases caused the bankruptcy in the first place.

According to some financial specialists, much of the debt people accumulate is a result of keeping up with the Joneses and not thinking ahead.

For 80% of clients counseled each month, the debt is credit card related and averages $32,000 – a result of six to eight cards. Consumer credit organizations say the new law provides debt-reducing strategies for those considering filing bankruptcy and curbs abuse.

Under the new law it has become a requirement that the person filing bankruptcy obtains credit counseling both before and after filing for which that person will be charged.

So now the consumer would then know the advantages and disadvantages of declaring bankruptcy. Yet it seems merely another expense for an already financially stressed individual.

People filing bankruptcy in general are not over spenders, but merely faced with temporary financial disasters such as medical costs, layoffs, a divorce, gambling debts or other crises. Before you can file bankruptcy, you are now required to complete credit counseling with an agency approved by the U.S. Trustees office.

This credit counseling is designed to help you determine whether bankruptcy is appropriate.

Once you complete your bankruptcy, the law requires you to attend another credit counseling session.

These are new requirements, before this law was passed the law did not require a person to go through counseling either before or after the filing of bankruptcy.

Second, under the old law, a person could decide to file under Chapter 7 or Chapter 13. Under the new law, the court will look at your monthly income and apply a means test relating to the state in which you live. If your income is less than or equal to the medium income, then you will be allowed to file Chapter 7 which in effect will give you a clean slate.

This medium income can vary from $28,000 in Missouri to $56,000 in Alaska. If your income is greater, you may be forced to file Chapter 13 unless you can demonstrate you do not have enough disposable income.

Under Chapter 13 you will not get a clean slate but will have to make payments on your debts.

Also, your attorney now must personally certify that your bankruptcy filing is accurate. This means more work for the attorney, with higher legal fees.

Advantages of declaring Bankruptcy:

Legal protection from creditors

Takes care of all or most debt

In some cases, can keep home and car

May stop complete financial ruin

Provides a fresh start

Disadvantages of declaring Bankruptcy:

Bad credit

May have to repay partial debt load and return collateral to creditors

May lose assets, including house and car (If the house is worth more than a certain amount).

Bankruptcy becomes public record, and

Remains on credit record for seven to 10 years

In the past, a bankruptcy offered a fresh start for the filer, said Columbia attorney Gwen Froeschner Hart. The new federal legislation offers language directed at helping creditors.

If you analyze credit card expenses for most people, you’ll see that they often include medical bills and day-to-day expenses for the elderly or those earning low or fixed incomes. Records show that 50% of credit card holders do not pay their full credit card bills every month.

33% of the population can’t afford medical insurance so have to charge their prescription drugs.

With the recent Medicaid cuts and rigid bankruptcy legislation who knows what is going to happen to these people.

There are some who say consumers are abusing creditors. The irony is that credit card companies are begging for customers and offering large amounts of unsecured credit, yet at the same time, lobbying for stricter debt controls.

bankruptcy guide

People view bankruptcy as a wakeup call and well they should because that means they hit the bottom of the barrel and are now scratching the bottom – for more cash! If you believe misery loves company, be secure in the knowledge that there are at least 1.5 million people in there with you, that is how many filed for bankruptcy in the last year. Anyone can over-extend themselves and many do for more reasons than I could count.

  Filing for bankruptcy is not only used by the lower and middle class but the rich as well. Famous people have fallen into the hole and climbed out, people like:

Donald Trump, Filed in 1990 – Kim Basinger, in 1993 – Burt Reynolds, in 1996 Rembrandt, in 1656.  I am not sure about the last one; he may still be trying to dig his way out!

 In the old days they would send people to debtors’ prison or even put them to death (not in America though), treating them like criminals. In these more civilized times, the government not only banned this kind of barbaric action but made into law rules to protect us.

 The bankruptcy code, also known by title 2 of the United States code (11 U.S.C.,101-1330),  has been put into place to protect the rights of the individual and corporations, giving them  a fighting chance against dept collectors, bankruptcy courts having the final word. There are basically two kinds of dept, secured an unsecured. Secured is where the creditor has collateral, be it your car, boat, house, or any material thing of value that they can take possession of if the dept is not paid. Unsecured is simply just the opposite, where the creditor has no collateral at all. In this case if the dept is not paid all they can do is use a collection agency where they call you day and night. Also, you must watch out with an unsecured dept because if the balance is large enough the creditor can put a lean on your property by getting a court order. This will prevent anyone from selling their house and moving away to hide from creditors.

  If you or anyone you know is behind on payments, there is something they should know. Since 1997 the government stepped in to stop dept collectors and collection agencies from harassing and threatening people in the middle of the night and using unethical collection practices. The Fair Dept Collection Practices Act (FDCPA) makes collections agencies follow certain guidelines. These are things collectors must do:

*Stop contacting you if the request is in writing and you dispute the dept in writing.

*Within 5 days of their first contact they must send you a letter stating the outstanding dept and creditor.

*If you want to dispute all or part of the dept the collection agency must stop contacting you until the creditor responds to your inquiry.

*If the collection agency wants to take you to court for the dept owed on behalf of the creditor it should summon you to the county where you now live or where you first singed the contract.

  Now, do not be alarmed just because a creditor threatens to sue you because most times it is just meant to scare people into paying on depts.

 Under the act (FDCPA) there are many things collection agencies cannot do, some of which are:

*No calling you at work

*Indicating they may be working with the federal government

*No calling your friends or family

*Implying that you may go to jail, garnish your paychecks unless the dept holder plans to do it

  Our government, in its infinite wisdom reasoned a long time ago that if they send everyone to jail there is zero change of collecting on any dept on behalf of a creditor.  You probably have heard of someone that has had their wages garnished, that is creditors who get a court order to take a piece of their check until the dept is paid. This is a common practice in states that allow wage garnishment and there is little you can do about it except for contacting an attorney. Did you know if you have an unpaid school loan or owe the IRS, they don’t even need a court order to garnish wages, even in states that normally don’t allow this?  You can bet on it; they can also take your tax refunds!

As for personal property, in cases like a store dept (store credit card, personal check or payment plan) on an item like major appliances or furniture you may have bought they still need a court order to take it back, unless you let them in anyway. That is right!  If you let them in without a court order they can come and get it back!  Many times, if is just not worth it for them to re-possess items because they must go the process of getting a court order and pay someone to carry it out. Also, it may be harder to sell a used item that may be stained or damaged. One final word on this point, remember on secured loans and cars there is a definite risk of repossession if the loan (mortgage or car finance) is not paid. There is usually too much money involved here for creditors to lose so these payments should be on top of you to pay list!

 If you find collectors are not playing by the rules you should call an attorney or the Federal Trade Commission’s response center at 1-877-382-4357 (FTC-HELP)

You can check out FDCPS’s website at http://www.ftc.gov/os/statutes/fdcpa/dcpact.htm for more info.

How to Remove A Bankruptcy

Dealing with bankruptcy is tough, but you are not alone. Bankruptcy comes with consequences, as far as your credit is concerned, and even after it has been discharged, you will have some work to do. How do you repair your credit after bankruptcy? What do you need to know?

The length of time depends on the type of bankruptcy. A Chapter 13 bankruptcy will be on your report for 7 years while a Chapter 7 bankruptcy will be on your report for 10 years. However, there is a way to get a bankruptcy removed from your credit report before the 7 or 10 years and you can still get credit.

Waiting a few years to get credit may be too much for some people, especially because even after you qualify for credit you will have to pay crazy interest rates. Instead of waiting too long and paying ridiculous rates, work to reduce the negative effects of your bankruptcy. You will be able to repair your credit and receive great credit offers.

A bankruptcy on your credit report can damage your credit score in a huge way. It will take 130-150 points from your FICO if you have a score of 680 and 220-240 points if your credit score is 780. This drop will, most likely, cause creditors to decline your credit applications and if you qualify, they will charge high interest rates. Moreover, the amount you can borrow will be limited. Even when filing for bankruptcy is your best option, you need to be aware of the implications.

The first and most important step would be to remove the bankruptcy from your credit report. Another important thing is assessing and changing your financial habits, so you never have to file for bankruptcy again. Check your income and expenses and put something into your emergency fund. One habit you really need to cultivate is the habit of paying your bills on time. Your payment history is the biggest determinant of your credit score. As you strive to repair your credit, do not accrue new debt.

At least, filing for bankruptcy gets most of your debt discharged. Credit bureaus will have you thinking it is not possible; but you can get a bankruptcy removed. If you file a dispute concerning your bankruptcy, file three different disputes with all three bureaus. They are separate companies and you cannot file one and expect it to apply to them all. In your dispute, state the facts and do not be guided by your emotions. It is totally possible to do this on your own.

However, the process can be tedious and lengthy and positive results are not guaranteed. You dispute the bankruptcy by asking the bureaus how they verified your bankruptcy or by pointing out inaccurate information in your credit report. The bureaus are required by law to respond within 30 days. If they do not verify it, they will send you a written statement and you can use it to have the bankruptcy removed. Before you dispute, suppress your profile with LexisNexis.

After you suppress your file, freeze your file with LexisNexis as well other third-party companies that collect consumer information. Now you want to obtain a document from the local bankruptcy clerk saying they do not report to third parties. This can also be found on their website. All files must have a credit freeze prior to sending a 609 Dispute Letter to the three major credit agencies Equifax, Experian, Transunion. You can also include public record removal letters. 

Innovis Security Freeze Options

1-800-540-2505

https://www.innovis.com/securityFreeze/index

Advance Resolution Services A.R.S.)

1-800-392-8911 (no website)

Sagestream (formely ID Analytics)

1-888-395-0277

https://www.sagestreamllc.com/security-freeze/

LexisNexis

1-888-497-9172

https://www.lexisnexis.com/privacy/

Corelogic/CREDO

1-877-532-8778

http://www.corelogic.com/solutions/credco-consumer-assistance.aspx (information only)

Factor Trust

1-844-773-3321

https://ws.factortrust.com/consumer-inquiry/request-your-credit-report/

Clarity Services Inc.

1-866-390-3118

https://www.clarityservices.com/support/security-freeze/

Microbilt

1-800-884-4747 option #5

1-888-222-7621

http://www.microbilt.com/us/consumer-affairs

(Freeze all third-party companies prior to disputing a bankruptcy)

Below is an example of what you should receive from the bankruptcy courts before disputing with the three major credit bureaus. Also, read below to send an email to Pacer. Make sure you email them for your records. Below is what they sent me. Hi, my name is (place your name) and i wanted to know the procedure or the process you use when validating and reporting public records to credit bureaus. Thank you. 

Public Access to Court Electronic Records (PACER) is an electronic public access service of the United States Federal Courts that allows users to obtain case and docket information from Federal Appellate, District and Bankruptcy courts through the Internet. PACER does not contact consumer reporting and credit reporting agencies. PACER simply provides access to federal court records.

Thank you,

PACER Service Center

Phone: 210-301-6440

Toll Free: 800-676-6856

For Frequently Asked Questions: http://www.pacer.gov/psc/hfaq.html

For Account Information: https://www.pacer.gov/psco/cgi-bin/psclogin.pl

Below is an example to include with the 609-dispute letter. This is after you place a security freeze with third party companies. 

Consumer Credit Reports Information 

All bankruptcy case filings appear for 7-10 years from the date the case was filed on a credit report. Federal Law 15 U.S.C. §1681c, “Requirements relating to information contained in consumer reports,” provides information regarding bankruptcy cases and what can be disclosed. Bankruptcy records are public records unless sealed, and all information contained in them can be retrieved by anyone, including credit reporting agencies.

The U.S. Bankruptcy Court is not responsible for credit reports. Any disputes with a credit agency must be resolved by the debtor and that agency. If you wish to obtain a copy of documents filed in your case, you may set up an account with http://www.pacer.gov, or you may come to our office at 701 Broadway, Nashville, TN 37203. If you come to our office, the price for copies varies. If you print the documents, it is $0.10 per page. If the Clerk prints the documents, it is $0.50 per page. The Clerk accepts cash, cashier’s check, or money order.

Cashier’s checks and money orders must be made payable to U.S. Bankruptcy Court. Filing for bankruptcy is never anyone’s first option. However, sometimes it is the best thing you can do to help your financial situation. It is a negative account on your credit report, but it frees you from debt. Here is all you need to know about bankruptcy. Bankruptcy is basically the process of eliminating debt or satisfying it under different terms. It is a serious decision but if you cannot pay back everything you owe, it can set you free from debt.

The two major types of bankruptcy are Chapter 7 and Chapter 13. The other one is Chapter 11— it is usually for businesses but can also apply to individuals. Chapter 7 bankruptcy is for people who meet specific income guidelines and cannot afford to satisfy the debt using a repayment plan. There is a means test that you must pass to qualify. It is the fastest and cheapest option. With this type of bankruptcy, your personal property is likely to be sold off to satisfy the debt instead of you making payments. If you want to protect some belongings from being sold off, you need to apply for exemptions.

This depends on the debt you owe. You can use a Chapter 7 delinquency to delay a foreclosure process. As for unsecured debts like personal loans or credit cards, you may be able to file for an exemption on your car, home, or other major items to protect them from being auctioned or repossessed. Your state laws will determine the eligible exemptions. Chapter 13 bankruptcy is for people who make a lot of money, preventing them from qualifying for a Chapter 7.

Its advantage is that your property will not be sold off, but you will have to pay your lenders over the next three to five years. The repayment plan varies. All secured debts, priority debts, and administrative fees must be repaid in full for you to keep your property. Your income determines the duration of the plan and the amount you will pay on unsecured debt. Chapter 11 is mostly for companies, but individuals may apply. You can qualify if your debt level surpasses the limits of Chapter 13.  Chapter 11 is like Chapter 13 in most ways such as security of property from repossession. The main difference is that you must repay your debt over a five-year period. There is no option to reduce the period.

A bankruptcy is bad for your credit score. It can deduct 160 to 220 points from the score. A Chapter 13 bankruptcy remains on your report for seven years. A Chapter 7 can stay for ten. The effects, however, lessen with time. Getting credit immediately after a bankruptcy will be a challenge; but with time, you will begin to qualify. You may still have to pay crazy interest rates. A mortgage will be the hardest to get.

Is Bankruptcy the Best Option for You? There is no simple answer to this question and the decision lies with you. Talk to a credit counselor so they can walk you through it. Most importantly, figure out how you got here and how you can avoid such a pitfall next time. Even though a bankruptcy will linger on your report for a while, there are useful tips to help you improve your score and become eligible for credit, even with the bankruptcy still on your file. This is no easy task, but it is possible. Talking to a professional will provide knowledge and experience and could get the account permanently deleted from your report before the seven years. In the process, they can get other negative items removed from your report as well. Some people get into financial troubles due to situations that are out of their control such as medical emergencies or a job loss.

Other people get into trouble because of careless spending. Whatever the reason for filing for bankruptcy, try your best to make sure it never happens again. If you have a problem with overspending, come up with a monthly budget and stick to it. If an emergency is the reason for your financial hardship, consider setting aside a rainy-day fund. Even if money is tight, find ways to help you spend less so you can save. A credit card is a quick and effective way to improve your credit.

You may be hesitant because more debt is not exactly what you are looking for, but a positive payment history affects your score more than any other component. Instead of charging all your expenses to your card, pick a single bill to pay with your credit card every month and then repay the balance immediately. A long history of on-time payments will start to increase your score. How do you get a credit card with a bankruptcy?

You have the option of both secured and unsecured credit cards (even immediately after a bankruptcy). A secured credit card requires you to place a refundable deposit equal to your credit limit. The deposit is security and you will be paying for the card balance out of your own pocket. Ensure that the credit card issuer reports your monthly activities to the three credit bureaus. Do not apply for multiple credit card applications as this could hurt your score even more. Before you start thinking about a car, be responsible with your credit card for at least six months. This shows that you can repay your debts and improves your score.

Also, set aside some money to use as a down payment, even if you are eligible for the full amount. Remember you will, most likely, must pay a higher interest rate. Consider a used car rather than a brand new one. Buying a house will have to wait for a while depending on the type of bankruptcy you filed for and the loan you want. You will have to get permission from the court and have a 12-month history of on-time payments. You might also have to pay a higher down payment and interest. Because of this, spend the seasoning period making responsible financial decisions and rebuilding your credit.

5 Easy Steps to Rebuild Your Credit after Bankruptcy

Bankruptcy often is the last ultimate solution for many debtors who have unbearable debts. With filing a bankruptcy, you will get rid of your debts instantly and relief you from the harassing call of your creditors.

Although bankruptcy has many undesirable consequences such as your bad credit record will remain on your credit report for 7-10 years, but with a little work, you can improve your credit even before these negative records expire. Here are five easy steps you can take to rebuild your credit.

Step 1: Get to know your current credit status

The first step to rebuilding your credit is to look at exactly where you stand. Order all your three credit reports from those three national credit bureaus: TransUnion, Equifax, and Experian. You can order these reports online, it easy and secure.

Print each report and review it closely. Try to understand the information listed in your credit reports and highlight any negative records or inaccuracies that are damaging your credit score.

Step 2: Check the expiration dates

By law, your bad credit record will remain in your credit report for 7 to 10 years, but the exact expiry date might be different among these 3 reports. Your bad record will still remain at your credit report although you have pay off your old debts and discharge from bankruptcy.

Look up the exact date of each of bad records including judgments, liens, charge-offs, late payments, bankruptcy filings, and collection records. You will likely see a major improvement in your credit score when these records expire.

Step 3: Request For Correct On Any Inaccurate Records

If you find inaccurate records, fraudulent accounts, or records that should have expired on you credit reports, you have the right to send a separate dispute letter to each of the credit bureaus to correct your Equifax, Experian, and TransUnion records. The bureaus will initial a 30 days investigation to see whether your requests are valid and if so, they will correct the inaccuracy in your credit report.

Just one note, don’t try to dispute any of the positive information listed in your credit reports and it is a waste of time to attempt to dispute these records. Disputing positive information may actually harm your credit scores.

Step 4: Start to create good credits

Since there is no way to remove your bad record from your credit report, the best way to improve your credit score is to add good credits and building up your credit from there. You can easy do this by open up a new credit card from banks like Orchard Bank (Orchard bank has credit card plan designed specially to help people rebuild their credit after bankruptcy).

Use this new credit card responsibly and make the monthly payment timely; with this you are building new history of good credit behavior on your credit report. Over time, you may want to open additional credit card accounts or obtain a loan to boost your credit score even higher.

Step 5: Monitor your progress

Subscribe to a credit card monitoring service or get a credit card monitoring software and use it to track your credit score progress closely. Your credit score should improve steadily as you continue to use credit responsibly and add new positive information to your credit reports.

Summary

Bankruptcy does not need to chain you to bad credit for the next seven to ten years, but you have to be proactive in order to recover and rebuild your credit.