Path To Credit Recovery
If you are avoiding talking to a bankruptcy trustee because you are concerned about how your credit will be affected, its important to consider two factors:
If debt is holding you back from rebuilding your credit, talk with a Licensed Insolvency Trustee about how to eliminate your debt. We provide free, no-obligations consultations during which we will conduct a full debt assessment and provide you with options to get out of debt so you can build a stronger financial future.
What Happens To Company Credit Cards
If your employer issued you a credit card to pay for travel and other expenses, you might be concerned about including it in your bankruptcy. Youll only have to list the card if youre liable to the lender for the balance.
Company credit cards come in three varieties based on whos liable on the account:
- The monthly statement goes directly to the employer, and the employer is responsible for paying the bill.
- The monthly statement goes to the employee, who is liable for payment of the account, then seeks reimbursement from the employer.
- A combination of the two. The statement usually goes directly to the employer, but employees reimburse the company for any personal expenses.
When you file for bankruptcy, you must list the card if you have any personal liability on it. If your company shoulders that entire burden, and you have no responsibility for the account, you shouldn’t list the card.
If youre not sure whether youre responsible for payment, your human resources department should be able to clear that up.
But this may clue you in: if your employer did nothing more than hand you a card and tell you what you could purchase with it, its probably a company-issued card that carries no individual liability.
Derogatory Mark: Missed Payments
If you are at least 30 days late, expect a derogatory mark on your credit report. Missed payments typically stay on your credit reports for 7½ years from the date the account was first reported late. The later the payment goes moving to 60 days late, 90 days late and so on the greater the damage to your credit scores.
What to do: Pay your bill as soon as you can afford to. If youve never or rarely been late before, you might be able to get the creditor to drop the late fee. Call the customer service number, explain your oversight and ask if the fee can be removed. You can also write a goodwill letter. If paying the bill is not an option, call your creditor and let them know about your financial situation to see if you can work out a hardship plan.
The negative effect on your credit scores will fade over time. Try to stay on top of all your payments so positive information in your credit reports dilutes the effect of the missed payment.
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How Long Do Bankruptcies Impact Your Credit Scores
Since your credit score is based on the information listed on your credit reports, the bankruptcy will impact your score until it is removed. This means a Chapter 7 bankruptcy will impact your score for up to 10 years while a Chapter 13 bankruptcy will impact your score for up to seven years. However, the impact of both types of bankruptcies on your credit score will lessen over time. Plus, If you practice good credit habits, you could see your score recover faster.
Also, how much your credit score decreases depends on how high your score was before filing for bankruptcy. If you had a good to excellent score before filing, this likely means your credit score will drop more than someone who already had a bad credit score.
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What Else Should I Know
Utility Services Public utilities, such as the electric company, cannot refuse or cut off service because you have filed for bankruptcy. The utility can require a deposit for future service and you do have to pay bills that arise after the bankruptcy is filed.
Discrimination An employer, government agency, or student loan lender cannot discriminate against you because you have filed for bankruptcy.
Drivers License If you lost your license solely because you couldnt pay court-ordered damages caused in an accident, bankruptcy will let you get your license back.
Co-signers If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay the loan. If you file a Chapter 13, you may be able to protect the co-signer, depending upon the terms of your Chapter 13 plan.
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What Is Credit Counseling
In your credit-counseling session, the agency will review your budget and discuss your possible options. For example, filing bankruptcy may be one option another option may be to enter into a debt management plan administered by the agency. Under a debt management plan, you repay some or all of your debts by sending the agency a monthly payment. The agency then distributes that money to your creditors. For some people this makes sense. For others bankruptcy may be the best option.
Be very careful in choosing an agency for the required counseling. Some agencies have been known to pressure people into debt management plans as a way of avoiding bankruptcy whether it makes sense for those people or not.
Before choosing an agency, keep these points in mind:
- The agency may charge fees for their services. These fees vary from agency to agency.
- In many cases bankruptcy may actually be the best choice for you.
- Dont sign up for a debt management plan that you cant afford, you may end up in a bankruptcy anyway.
- There are approved credit counseling agencies that do not offer debt management plans.
Agencies provide counseling in various ways. Some do it in person. Others do it by telephone or over the Internet. No matter what method you use, when you complete your counseling, the agency will give you a certificate of completion. The certificate verifies that you received the required counseling. You must file this certificate with your bankruptcy petition.
Do You Qualify For Chapter 7 Bankruptcy
To qualify for Chapter 7 bankruptcy you:
Must pass the means test, which looks at your income, assets and expenses.
Cannot have filed a bankruptcy petition in the previous 180 days that was dismissed because you failed to appear in court or comply with court orders, or you voluntarily dismissed your own filing because creditors sought court relief to recover property they had a lien on.
Heres How Bankruptcies Impact Your Credit Score
While bankruptcies on your credit report will always get factored into your credit score for as long as they are on there, the impact on your score lessens with each year that passes. So, you may see a dramatic drop in your score in the first month immediately following your bankruptcy filing, but by the end of the first year it could have less weight, and certainly less in later years compared to year one.
Your own credit profile will also play a part in how much your credit score is affected when you declare bankruptcy. Similar to how having a higher credit score can ding your more points if you miss a credit card payment, so, too, is the case if you file for bankruptcy. According to FICO, someone with good credit may experience a bigger drop in their score when a bankruptcy appears on their report than someone with an already poor credit score.
Estimates we found online from places like Debt.org show how people with different credit scores would be impacted by a bankruptcy filing. Someone with a credit score of 780 or above would be dinged between 200 and 240 points, while someone with a 680 score would lose 130 to 150 points.
Whatever the case, no one really benefits from filing for bankruptcy. Its an option of last resort that sometimes even those with good credit find themselves making.
You Can’t Get Rid Of Credit Card Debt Incurred Due To Fraud
Sometimes the creditor can challenge the discharge of your credit card debt. If successful, the court will not discharge the debt, and you’ll remain responsible for paying for it after your case ends. Here are a few common situations:
- You made a false statement on your credit card application to deceive the creditor that was “material” to the credit card issuer’s decision to extend credit to you. For example, you grossly inflated your income.
- You charged more than $725 to any single creditor for luxury goods or services within 90 days of your bankruptcy filing. In this situation, the law presumes that your intent was fraudulent.
- You got a cash advance from a single creditor totaling more than $1,000 within 70 days of your bankruptcy filing.
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How Long Does The Bankruptcy Process Last
There are two major factors that will determine the length of the bankruptcy process: whether its your first filing and whether you have what is known as surplus income. A person who files for bankruptcy for the first time without any surplus income can be discharged from bankruptcy after nine months. If you do have surplus income, it can take 21 months for you to be discharged from bankruptcy. Read more about how surplus income is calculated
If you file for bankruptcy a second time, it would take 24 months to receive a discharge if you dont have surplus income, or 36 months with surplus income. In any case, the bankruptcy process could take longer than expected if the bankruptcy is opposed by a creditor or the court.
If you file for bankruptcy three or more times, the length of the bankruptcy will vary depending on your individual circumstances.
So What Really Constitutes Undue Hardship
Those cases where borrowers have succeeded in having their student loans discharged are insightful. Specifically, a court might agree that repaying your loans would be an undue hardship if you cant maintain a minimal standard of living for yourself and any dependents, if the hardship will continue throughout the loans repayment period, and if youve sincerely tried to repay your loans before filing bankruptcy.
What does a court consider a minimal standard of living? Again, case law and some common sense can be a guide. It might mean:
- Your income has been below the federal poverty level for several years and doesnt show signs of improving.
- Youre on public assistance or dependent on a family member.
- You have a debilitating mental or physical illness or permanent injury.
- You have a child with a serious illness who requires round-the-clock care.
- Divorce reduced your family income with no hope of it returning to its previous level.
- Disability checks are your only source of income.
- You depend on public assistance to support your children.
- You support a spouse who was seriously and permanently injured in a car accident or who has developed a total disability.
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What To Do Before Filing Bankruptcy
Do contact an Ohio bankruptcy lawyer as soon as you think youre in trouble. Meeting with an attorney to discuss your financial situation will help provide the necessary knowledge and advice that you need to move forward and consultation is FREE. Too many people wait until the last minute, which can dramatically limit the number of options that are available to you.
Do be honest. Be forthcoming with your Ohio bankruptcy lawyer, as well as yourself about everything. It is imperative that you disclose everything and anything about your financial situation in order for it to be handled properly. Whatever information you tell your attorney, will stay with your attorney. If there is information that must be disclosed in bankruptcy papers, then your attorney will discuss this matter with you beforehand. The attorney-client confidentiality protects you from having unwanted information released. For example, if you have a house that is paid off or a big bonus from work that you do not want to discuss, your attorney will advise you as to whether this is information that you will need to disclose. It is far worse to hold information back and realize later on that you are under penalty or perjury for not sharing information.
Do continue to make payments on any vehicle that you want to keep. If you default on a payment, creditors have the right to repossess your vehicle without giving you notice.
How Can I Get A Copy Of My Credit Record
There are two ways to get your credit report : either through the mail or via the internet. If you want to obtain your credit report for free, you must use the mail. It is also important to do what you can to make sure your credit report shows a history of reliable credit repayments, and as few unfavorable repayment incidents as possible.
For more detailed information related to credit reporting, visit Equifax Canada or Trans Union website. Talk to a licensed trustee today. We have trustees everywhere from Calgary to Montreal and more. Get a free consultation today!
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Could Anything Prevent Me From Being Discharged
It is possible that your discharge could be opposed by a creditor, an LIT or the Superintendent of Bankruptcy. Generally, a bankruptcy discharge is opposed when the debtor has not fulfilled the requirements of the bankruptcy process. This might be due to:
- Not making the required monthly payments
- Failing to attend two mandatory credit counselling sessions
- Committing an offence related to the bankruptcy claim
There are a few other reasons why a bankruptcy claim could be opposed. For instance, if the bankruptcy was caused by gambling or if a creditor suspects fraudulent activity, it could be opposed by the creditor.
If the bankruptcy discharge was opposed, the debtor would have to attend a court hearing to determine the conditions they would need to fulfil in order to be discharged from bankruptcy.
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Heres why: Theres no credit check necessary for the OpenSky® Secured Credit Visa® Card application process. Instead, your credit limit is determined based on your refundable security deposit, starting at $200. For those focused on credit building after bankruptcy, this benefit is especially enticing, because a hard credit check can ding your credit a bit.
Read our review of the OpenSky® Secured Credit Visa® Card for more thoughts on this option.
Different Types Of Bankruptcy
For individuals, there are two main types of bankruptcy cases. Most individual debtors file for Chapter 7, which can also be described as âstraightâ bankruptcy or âliquidation.â Under this plan all non-exempt assets are converted to cash , and secured creditors may have the item they financed turned over to them , unless the debtor reaffirms the debt with the courtâs approval prior to obtaining a discharge. Chapter 13, also called âreorganization,â is an option for people with regular income and debts that are less than the limits allowed by law. When you complete a Chapter 13 plan, you have the satisfaction of keeping your assets, paying your creditors, and possibly discharging some of your debts.
Bankruptcy is a serious step. If you choose to file Chapter 7 or Chapter 13, you will probably need to hire an attorney. Be sure to find an attorney who has experience handling the type of bankruptcy case you plan to file. The following overview of Chapter 7 and Chapter 13 will give you some idea of whatâs involved.
You’ll Likely Have To Give Up All Of Your Credit Cards If You File For Chapter 7 Bankruptcy But You Can Start Rebuilding Your Credit Once Your Case Is Closed
Updated By Cara O’Neill, Attorney
If you file for Chapter 7 bankruptcy and are hoping to hang onto one of your credit cards, you will likely be out of luck. Once your credit card company learns of your bankruptcy, it will almost certainly cancel your card. But all is not lost. Read on to find out more about why you cannot keep credit cards when you file for bankruptcy and what you can do to get another one later on.
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