Review Your Credit Reports
Monitoring your credit report is a good practice because it can help you catch and fix credit reporting errors. After going through bankruptcy, you should review your credit reports from all three credit bureausExperian, Equifax and Transunion. Due to Covid-19, you can view your credit reports for free weekly through April 20, 2022 by visiting AnnualCreditReport.com.
While reviewing your reports, check to see if all accounts that were discharged after completing bankruptcy are listed on your account with a zero balance and indicate that theyve been discharged because of it. Also, make sure that each account listed belongs to you and shows the correct payment status and open and closed dates.
If you spot an error while reviewing your credit reports, dispute it with each credit bureau that includes it by sending a dispute letter by mail, filing an online dispute or contacting the reporting agency by phone.
When The Credit Card Company Alleges Fraud
If the credit card company alleges fraud associated with your credit card this may affect the automatic stay. If you obtain a discharge from debt when your case is closed the automatic stay ends. At this point you will no longer be responsible for the debt. Questions or concerns should be reviewed with a qualified bankruptcy expert.
Should I File Bankruptcy
This depends on your situation. If you face major legal matters like judgments, liens, foreclosures, etc., filing bankruptcy maybe your best option, and you should speak to a bankruptcy attorney.
If you face unpaid medical bills or other collection accounts, then bankruptcy is not always the best answer. Collection agencies are unlikely to sue, and you can get away without paying them. You can also dispute the collection accounts and have success getting them removed from your credit report.
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The Details Of The Bankruptcy Case:
The 74-year-old debtor applied for a Lowes credit card on March 15, 2008. She said she had an annual income of $48,000. In fact, her only income was $667 in monthly Social Security payments. Her credit application was approved with a credit line of $12,500. Between May 13 and May 16, the debtor used the card to purchase approximately $5,000 worth of gift cards. There was a balance of $6,039 on the account when she filed for Chapter 7 relief on Aug. 29, 2008. Prior to filing for bankruptcy, the debtor made three payments on the account totaling $160.
The bankruptcy court ruled that the debtors intention of repaying the cards was not based on any real ability to repay and that since the creditor had relied on the debtors false income statement the debt should not be discharged in bankruptcy.
Checking Your Credit Reports After Chapter 13
If you filed Chapter 13 bankruptcy, your case wont be discharged until the end of your three-to-five-year repayment period, so you can just wait 90 to 120 days after your bankruptcy filing to request your credit reports. The status of accounts included in your Chapter 13 repayment plan may or may not be reflected in your credit report: Creditors are not obligated to report payments received during the Chapter 13 repayment period, but some do.
Check to make sure payments to any accounts excluded from the bankruptcy settlement are being captured.
Once your repayment period ends two and a half to five years after you file Chapter 13, depending on the terms of your repayment plan youll receive a notice that your case has been discharged. Wait about 120 days and then check all your credit reports. Make sure all loans settled under the repayment plan are closed and list zero balances.
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Other Actions A Creditor May Take After Obtaining A Judgment
State laws determine the legal steps a credit card company may take to collect a judgment debt. In some states, creditors are allowed to garnish your wages for judgments. Some states allow judgment holders to apply for supplemental proceedings to identify any personal property the judgment holder may seize to satisfy the debt.
The actions the credit card company takes to collect a judgment debt depends on the company. Some credit card companies and debt collectors pursue judgment debts aggressively. Thatâs because they can afford to have full-time attorneys working on their behalf. In some cases, a person could lose a substantial portion of his or her income in wage garnishments or lose property to satisfy a judgment debt.
Here’s How Soon After Bankruptcy You Can Get A Credit Card:
- Secured credit card: After bankruptcy discharged
These cards require a refundable security deposit, usually at least $200, which doubles as your credit limit. Because you’re putting up your own money, your approval chances are high.
The Discover it Secured Credit Card does not reject applicants for having a Chapter 7 bankruptcy on their credit history. And the Capital One Secured’s only bankruptcy requirement is that the case must be fully discharged. Some cards, like OpenSky, don’t even check your credit report when you apply, so they’re great for post-bankruptcy credit improvement.
- Unsecured credit cards for bad credit: After bankruptcy discharged
One example is the . Credit One Bank says a discharged bankruptcy won’t hurt your approval chances, but could lead to a lower credit limit and a higher annual fee.
If a friend or family member makes you an authorized user on their credit card account, that account will be added to your credit reports, and you’ll benefit if the main account holder pays the bill on time every month. If your friend or relative allows it, you will also get a card with your name on it to use for purchases.
In addition to finding the right credit card with which to begin rebuilding your credit, you should review your credit reports for errors and monitor your credit score moving forward. You definitely don’t want the problems that led to bankruptcy to repeat themselves.
7 Tips For Rebuilding Credit After Bankruptcy
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What Happens To Your Credit When You File For Bankruptcy
Your payment history is the most important factor in determining your credit score, and filing bankruptcy means that you won’t be paying covered debts in full as you initially agreed.
As a result, filing bankruptcy can have a severely negative impact on your credit score. A Chapter 7 bankruptcy will remain on your credit reports and affect your credit scores for 10 years from the filing date a Chapter 13 bankruptcy will affect your credit reports and scores for seven years.
Regardless of which type of bankruptcy you choose, lenders will be able to see it on your credit reports in the public records section and it’s likely to be a factor in their decision-making. Once you’ve completed the legal process, it will show that both the bankruptcy and the debts included in it have been discharged.
If you apply for credit, lenders may not approve your application unless the bankruptcy has been discharged. Even then, you may have a hard time getting approved for certain types of loans. If you do get approved, you may face steep interest rates and other unfavorable terms.
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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Filing For Bankruptcy Stop Using Your Credit Cards
If you are among the millions of Americans struggling with debt that seems insurmountable, bankruptcy may be the best option for finding relief and a fresh financial head start. If you are considering bankruptcy, you should now that there are certain things you might want to avoid prior to filing under any Chapter of the bankruptcy code. This is especially true when certain action, such as using credit cards, may actually negate your eligibility for filing, or even subject you to criminal consequences.
For many people struggling with debt, using a credit card has been a means to get by. Unfortunately, incurring charges can only cause the cycle ofdebt to continue. At Allmand Law Firm, PLLC, we have worked with numerous men, women, families, and businesses throughout the Dallas Fort Worth area when they were dealing with tough times. We know the struggles our clients face, and we know that credit cards can be the lifeline they rely on when times get increasingly tough.
While using a credit card to pay down debts and obligations may not always have negative consequences, you must consider how it is being used and why you should try to limit or avoid using one altogether.
Four Things You Should Know About Your Credit Card
One of the first tools post-bankruptcy debtor uses to rebuild their credit score is the credit card. While they may start off with a secured credit card, within a year of making regular payments post-bankruptcy debtors can graduate to unsecured credit cards. But what are some of the important facts debtors coming out of bankruptcy need to look at before choosing a credit card?
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What Is Lien Avoidance
Some judgment liens can be eliminated, or avoided in legal lingo, in the course of a bankruptcy. A judgment lien is avoided if it applies to property you claim as exempt from liquidation or forfeiture in your bankruptcy.
In a Chapter 7 bankruptcy, the debtor’s primary vehicle is exempt from liquidation or forfeiture if it’s worth less than your state’s exemption limit. Any judgment lien against an exempted vehicle you own free and clear can be wiped out through bankruptcy.
Note that this is distinct from any claim to the vehicle retained by the issuer of the loan used to purchase it. If you are still paying off a loan on the vehicle, bankruptcy may eliminate your obligation to cover delinquent payments on that loan, but the lender’s right to repossess the vehiclea form of lien that’s not dependent on a court orderstill stands, and you may still lose the vehicle.
In a Chapter 13 bankruptcy, it’s possible to avoid judgment liens against certain real estate holdings by claiming the real estate as exempt from consideration in the bankruptcy process. Doing so can be tricky, however, because it also eliminates any protection you may have against repaying outstanding debt owed on any mortgage on that property. Because of the potential complexity of claiming exemptions under Chapter 13, it’s wise to consult with your lawyer, and perhaps a real estate professional, when considering your options.
Collection Agencies Are Unlikely To Sue
The collection agency didnt sustain the loss they only paid a fraction of the amount owed. Why would they invest the time, resources, and money into trying to collect on one account?
This is why collection agencies rarely sue consumers. The same holds true for most any other collection account. If you get sued over an unpaid debt, it is usually by the original creditor when there is a high unpaid balance, such as owing $15,000 to Bank of America.
If they do sue you, contact them to see if you can work out a settlement. They are very likely to work with you and potentially allow you to pay less than what they claim you owe instead of hiring an attorney and paying court costs, etc. They really dont want to do that.
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Buying A Car Or House After Chapter 7 Bankruptcy
Many people are surprised to learn that filing bankruptcy won’t derail a car purchase or homeownership for long. If the bankruptcy helps clean up your credit faster than you’d be able to do on your ownas it does for many without the means to pay off outstanding debtsyour dream might be closer than you imagine. Specifically, if you take steps to rebuild your credit, it’s possible to get relatively reasonable interest rates when buying a new car within one to two years after bankruptcy. Securing a home loan within four years is well within reachand some people start the home purchasing process in as few as two.
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Why You Need To Work On Your Credit Asap
If you have a 550 credit score, borrowing is going to be challenging. A credit score of 550 or lower is usually too low to qualify for a mortgage. However, youre not that far off from the score you need to qualify for this good debt. With FHA financing options, you only need a 560-600 to qualify. Of course, if you want to use traditional financing options, you generally need at least a 600 credit score.
However, besides loan approvals there are other concerns that come with a low score:
So, is bankruptcy bad for your credit? Yes. But it might not be as bad as you think. And there are financing options specifically designed to help people in your situation. For instance, there are solutions for buying a car after bankruptcy.
You May Make Surplus Income Payments
When you file for bankruptcy, you must do the following:
- disclose to the LIT information about all of your assets and liabilities
- advise the LIT of any property that was sold or transferred in the past few years
- surrender all your credit cards to the LIT
- attend the first meeting of creditors
- attend two counselling sessions
- advise the LIT in writing of any address changes
- if required, attend an examination at the Office of the Superintendent of Bankruptcy and
- assist the LIT as needed in administering your estate.
You may be required to make additional payments to your LIT for distribution to your creditors.
In addition to paying the LIT’s fees, you may be required to make additional payments to your LIT for distribution to your creditors. These are called surplus income payments.
Each month during the bankruptcy process, you must submit a copy of your pay stubs and proof of other income to the LIT. The LIT then calculates your surplus income.
Surplus income is the part of your earnings that exceeds the amount of income a family needs to maintain a reasonable standard of living. This amount is set by the OSB annually. The larger your family, the more you are allowed to keep the more you earn, the more you are required to contribute.
In other words, if your household income exceeds the level set by the OSB, then you must make additional payments to your LIT during your bankruptcy.
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Filing For Bankruptcy Doesnt Help Your Credit At All
When you file for bankruptcy, youre giving your credit the death penalty. The bankruptcy and all of the accounts included in the bankruptcy will appear on your credit report for the next 7 years. Even a few years down the road, creditors will see you as high risk.
Youll have a hard time getting new lines of credit or loans for many years. Most people understand this. However, theyre told they have no other options and have to file bankruptcy if they cant pay their debts. False!
Maxing Out Your Credit Cards Before Filing Bankruptcy Can Be Fraud
Every time you use your credit card, you are obtaining creditthe credit card company lends you money with each swipe. Even when you use your credit card to buy a $2 candy bar, you’re being lent money for the purchase of that candy bar. Under federal bankruptcy law, credit obtained by “fraudulent means” can be deemed nondischargeable.
Is running up your credit cards right before you file bankruptcy considered to be “fraudulent means”? It can be if you do so for the sole purpose of getting what you can out of the credit card before wiping all the debt out in bankruptcy and you have no intention of repaying the debt.
As an example, suppose you visit with a bankruptcy attorney and make the decision to file Chapter 7. Then, knowing you won’t have to pay it back, you go on a spending spree with your Visa card. You intend to keep the stuff without paying back the debt because of the bankruptcy.
This behavior would likely be considered obtaining credit by fraudulent means. You’re using your credit card, and the credit card company is lending money based upon your promise to repay it. However, the fact that you have no intent to repay would likely be considered fraud.
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