Category Archives: Credit and Bankruptcy

THINGS NOT TO DO IF YOU THINK YOU MIGHT FILE BANKRUPTCY (PART 2)

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I recently wrote an article about what not to do if you think you might file bankruptcy.  About halfway through the article I realized that there is a lot of information on this topic, so I divided it into two parts.  The following list consists of what not to do if you intend to file bankruptcy.

 

1.   Do not use your credit cards during the 90 days prior to filing bankruptcy.  If you use your credit cards during the 90 days prior to filing bankruptcy, the lender may sue you in bankruptcy court to have the debt ordered to be nondischargable.  This means that the debt will not be affected by the bankruptcy discharge and you may also be liable for the attorney’s fees incurred by the lender.

 

2.   Do not file if you anticipate an inheritance or some other type of financial windfall within the next year.  If you become entitled to a financial windfall, such as an inheritance, within six months of filing bankruptcy, the trustee may be able to take that money and pay it to your creditors.

 

3.   Do not file bankruptcy if someone owes you money and you have a reasonable expectation of getting paid.  In this type of situation you have to weigh the amount of money you are owed and the likelihood of getting paid against your need to file bankruptcy.  The trustee can require that the money paid to you be given to the trustee and paid to your creditors.  If it is not a large amount of money, then it may not have any effect on your decision of when to file bankruptcy.  But if it is a significant amount of money you may want to wait until you receive the money and exempt as much of it as you can.

 

This is not an exhaustive list of things not to do prior to filing bankruptcy.  I have tried to address the most common situations I see in my bankruptcy practice, but there are many other issues that can arise.  The best advice I can give you is to consult with a bankruptcy attorney the moment you make the decision to file bankruptcy, so that they can advise you on your specific situation.

DON’T USE HOME EQUITY LOANS TO PAY OFF YOUR CREDIT CARDS!

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DON’T USE HOME EQUITY LOANS TO PAY OFF YOUR CREDIT CARDS!

I have to admit, that I am a little behind the times technologically.  I still have basic cable at home and I don’t have a DVR.  So while many Americans can simply fast forward through television commercials, I actually watch them.  One common theme in television commercials these days is the benefits of taking a home equity loan to pay down your credit cards.  But sometimes taking home equity loans to pay off credit card debt is a very bad idea.

 

When considering whether or not to take out a home equity loan, I suggest you crunch the numbers and consider your situation in this way.  If you are not struggling to make your credit card payments each month, but would like to pay off your credit card balances in order to get rid of those high interest loans, then a home equity loan may be a good idea.  But if you are struggling to make the minimum payment on your credit cards, then you will probably struggle to make your second mortgage payment after receiving a home equity loan and in that situation a home equity loan could end up costing you your house.

 

When you take out a home equity loan to pay off your credit cards, you are reducing your interest rate but you are also turning an unsecured debt into a secured debt.  When you default on a credit card debt, you risk being sued.  However many people that default on their credit cards never get sued, and after four years the statute of limitations will bar the credit card company from recovering on the debt.  Even if you get sued most of your property is probably exempt from being taken by your creditors, and you may be able to stop the lawsuit by filing bankruptcy.  When you take out a home equity loan to pay off your credit cards, you are turning your unsecured debt into secured debt.  Now if you can’t make your payments and you default on the loan you will lose your house.

 

Dallas Bankruptcy Attorney: ADD A STATEMENT TO YOUR CREDIT REPORT

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Have you ever had something happen that made you look bad, and you would have liked to explain yourself, but were never given the chance?  This happens on credit reports all the time.  You might have a great credit rating with no bad notations on your report for years, and then you lose your job.  A few months later, you are behind on your credit card, mortgage, and car payments, and your credit rating takes a hit.  After you find a new job and start making payments again, the blemishes on your credit report are still there, and they can stay there for seven years!

 

There is a provision of the Fair Credit Reporting Act that allows you to add a 100-word statement to your credit report.  You can use this statement to explain that a bad notation is a mistake, dispute the information on your credit report, or simply to explain that you just went through a tough financial period but things are better now and you are making your payments on time.  Keep in mind that this explanation will not increase your credit score, but it may give lenders more confidence in your ability and intent to repay debts in a timely fashion.  Make sure that the statement is provided to each of the big three credit agencies which are Experian, Transunion, and Equifax.  Each agency has their own procedure for adding consumer statements to credit reports, so be sure to contact the agency to find out their requirements.

Texas Bankruptcy Attorney:STRATEGIES FOR COPING WITH CREDIT CARD DEBT

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Dallas Bankruptcy Attorney:

STRATEGIES FOR COPING WITH CREDIT CARD DEBT

Recently I read an excellent article by Laura Coffey on MSN.com discussing strategies for reducing credit card debt.  As a bankruptcy attorney, I meet with clients everyday that are struggling with repaying high interest credit cards, and repaying these types of loans can be an uphill battle.  The average interest rate on credit cards is 14.9 percent, but interest rates of up to 28 percent are not uncommon.  At 28 percent interest a credit card balance is doubling every three years.  For many debtors, this makes repaying their debt nearly impossible.

 

Ms. Coffey suggests the following strategies for reducing personal debt:

 

1. Know how much you owe. Collect each of your bills with outstanding debts including all credit cards, mortgage, student loans, auto loans, personal loans, and bank loans. Create a list of all the creditors with monthly payment amount, balance, interest rate, and credit limit for each. Verify the payment due dates and the status of the account.

 

2. Prioritize which bills to pay first. If you can’t pay off all your monthly bills, first pay the bills that are a necessity for health, shelter, basic groceries and basic transportation. Then pay the secured loans such as your car loan. Payments on unsecured loans, such as most credit cards, should come last in these critical situations.

 

3. Obtain a free copy of your credit report and review it. It may contain an error that is creating a lower credit score that is leading to higher interest rates on your loans. If correcting the error results in a higher credit score, contact your creditors to make sure they know about your improved score.

 

4. Contact your creditors to negotiate lower rates. The less money you pay in interest, the more money you have to pay off your bills. If you are in danger of missing a payment, contact your creditors as soon as you realize you have a problem. They may be willing to work out a payment plan, lower your rate, or lower your monthly payment. Explain that you are in debt, the steps you are taking to repay it, and what you can pay today. If you request a lower interest rate and get turned down, politely ask to speak to the supervisor and ask again. Document all conversations, including whom you spoke with, and the date, time, and the results.

 

5. Pay more than your minimum. Your minimum payment is usually only 2 percent to 5 percent of your balance. At this rate, it will take many years to pay off your debt. In fact, your credit card bill now shows exactly how long it will take. You may be surprised about how much you will pay in interest payments by paying just the minimum payment each month.

 

6. If you have multiple credit cards with outstanding balances, focus on paying off the card with the highest interest rate first. Continue to pay the minimum on your other cards until the card with the highest rate is paid off, and then focus your effort on the card with the next highest interest rate. Keep your oldest credit card accounts open and occasionally use them to buy a magazine or a movie ticket — just pay it off each month. This may help improve your credit score.

 

7. Check into transferring your balance to a card with a lower interest rate. If your rate is above 15 percent, it could pay to transfer the balance for that card to one that offers 0 percent APR for at least 12 months for balance transfers. To take full advantage of this 0 percent interest, pay as much as you can above the monthly minimum. Only use this card for the balance transfer, not additional purchases. Pay attention to the balance transfer fee. At the beginning of 2009, the industry standard for a balance transfer fee was 3 percent; now several issuers have increased that fee to 4 percent.

 

Some people have so much credit card debt that they cannot repay their debt, even following these rules.  For those people, bankruptcy may be a good tool for obtaining relief from their debt.  Not all people are eligible to file bankruptcy, so if you are struggling with repaying your debt you should speak with an experienced attorney.  It’s also a good idea not to wait too long to get advice on bankruptcy.  There are limits on how much debt a person filing Chapter 13 bankruptcy can have at the time they file.  If you wait to file bankruptcy and your debt continues to grow due to interest and fees, you may find that you are no longer eligible for Chapter 7 or Chapter 13 bankruptcy.

(Source:  msn.com)

Dallas Bankruptcy: HOW LONG WILL IT STAY ON MY CREDIT REPORT?

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Dallas Bankruptcy: How long will it stay on my credit report? It depends on what Chapter you file under.  Chapter 13 bankruptcy cases will stay on a credit report for seven years from the date the case is filed.  Most Chapter 13 bankruptcy cases last five years, so after the case is completed the bankruptcy will be on your credit report for two more years.  Chapter 7 bankruptcy cases remain on a credit report for ten years from the date the case is filed.

It’s important to understand that having a bankruptcy listed on a credit report doesn’t necessarily guarantee a bad credit score.  Credit reports are made up of many positive and negative notations.  A bankruptcy is just one notation.  Most of my clients tell me that their credit score is higher a year after filing bankruptcy than it was before filing because they have discharged their debts and are better able to pay their bills on time.