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06

Jun 2021

Does Reaffirming Your Car Loan Help Your Credit Score?

Posted by / in After Bankruptcy, Weekly Posts /

“Does Reaffirming My Car Loan Help My Credit Score?”

Ray and Theresa, who filed bankruptcy with me last fall, asked me that last week.

Lots of people ask that same question after they look at their after-bankruptcy credit report and see that their car payments don’t show.  Then, they are told by their car finance company, “Your lawyer should have had you reaffirm your car. That way your payments would show and your credit score would be better.” 

What’s the truth? 

Does Reaffirming Your Car Loan Help Your Credit Score? A Top Bankruptcy Judge Wanted to Know

Last fall, Judge Margaret M. Mann asked that same question. She had a a stream of people in her courtroom reaffirming car loans and she wanted to know why. They told her it was to help their credit scores. So she asked–actually ordered–Wells Fargo to send their credit score expert and explain.  What Judge Mann heard was this: Reaffirming the debt cannot be said to affirmatively help debtors rebuild their credit since the benefit is minimal at best.

In other words, reaffirming your car loan is hardly any help to your credit score–and that’s if you make the payments on time. (It you miss a payment–if the car needs a repair you can’t afford or gets totaled, or any of the things that can happen–then you drag your score way down with after-bankruptcy bad credit.)

The Judges in Alexandria Already Hated Reaffirming

Bankruptcy Judge will turn down your reaffirmation

Chief Judge Margaret M Mann says reaffirming you car loan is hardly any help for your credit score.

 As far as I can tell, Judge Mann is the only bankruptcy judge who has put in writing her opinion on reaffirming car loans. But she is the Chief Bankruptcy Judge in the Southern District of California, the busiest bankruptcy court in America. So you can bet bankruptcy judges around the country read what she said on this.

Even before that, the judges here in Alexandria VA made it clear they didn’t like reaffirmations. Now they like them even less. So–unless it’s Ford Motor Credit or your credit union–I will not agree to reaffirming your car loan.  And even I did, the Judges here mostly won’t approve it.

Your After Bankruptcy Credit Report is Very Important

For most people with damaged credit, filing bankruptcy is the fastest way to fix it. 

That’s one reason why its very important for everybody to check your credit score two or three months after bankruptcy. 

When you do, you’ll see your  after-bankruptcy car payments don’t show on your credit report.  (The payments don’t show because after bankruptcy because you don’t have to make the car payment. The car still has to pay, but you don’t.) But even if those payments showed on your credit, the car payments would help your credit score hardly at all.  

I have some tips on how to rebuild your credit here and here.  As long as you need a car–and need that car–you should keep up the car payment. But filing bankruptcy means you don’t have to keep the car once you can get a better deal when your credit is better.  

That’s why we don’t reaffirm car loans. Reaffirming your car loan doesn’t really help your credit if you. And if you get behind, it’s a disaster.  

PS

Stephen Dunne, a bankruptcy lawyer in Philadelphia, also has a helpful article on Judge Mann’s opinion.  

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15

May 2021

After Bankruptcy, are you getting your mortgage statements?

Posted by / in Weekly Posts /

After Bankruptcy, are you getting your mortgage statements?

After you file bankruptcy, you are still supposed to keep getting your mortgage statements.  But, are you?

We talked about after bankruptcy mortgage statements at the NACBA 29ths annual convention

This is the Dolphin Hotel, where the 29th annual convention of the National Association of Consumer Bankruptcy Attorneys was planned. But it was moved to the internet, because of covid.

This question came up at the 29th Annual Meeting of the National Association of Consumer Bankruptcy Attorneys.  (I’m at that meeting this week, which was supposed to be in Orlando, but it’s actually on the internet.)

The Dodd-Frank law says that your mortgage company is supposed to send you your monthly statement.  And the Consumer Finance Protection Bureau says that still applies even after you file bankruptcy.  (Unless you say you don’t want them.) See 12 CFR § 1026.41(a)(2) and §1026.41(e)(5). 

Lots of us bankruptcy lawyers, meeting afterward on Zoom, think our clients are NOT getting their statements.

I’m Gathering Info

If you have experience NOT getting your mortgage statements after bankruptcy, let me know. I’m gathering info for the leadership of the Consumer Bankruptcy Attorneys. We want to see if there’s a big problem; and figure out what to do.

Laura@robertweed.com is keeping track of this for me.  Also, you can contact me directly. Robertweed@robertweed.com.  Thanks.

Are your getting your after bankruptcy mortgage state? Our first reply.

While I was writing this, I did a test.  Along with scanning the Selene Finance mortgage payment to one of my clients, I asked was she also getting a copy, or am I the only one. (I routinely scan and send these statements out. But I didn’t ask that question before.) 

She replied instantly, “I never received any statement from them. Can I sue them?”

So, I told her, that’s a great question. It’s what we are trying to figure out.

 

 

 

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09

May 2021

For most people bankruptcy works. For most people, debt settlement doesn’t.

Posted by / in Weekly Posts /

For most people, bankruptcy works. For most people “debt settlement” doesn’t work.

One reason.  The debt settlement people charge enormous fees–FDR and NDR charge at least $6,000 to “settle” $40,000 in credit cards (and you still have to pay the settlement).
Plus, they usually don’t work
.
See this email I got this email today from Ed.
Ed is paying the debt settlement company and got sued anyway. Why? Because the debt settlement people usually settle the smallest debts first.
And while you are paying off the small settlements, do the big cards just wait patiently? Or do they sue?
You can read what happened to Ed….What do you think?

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07

Feb 2021

The three toughest questions at your bankruptcy hearing

Posted by / in Blog, Weekly Posts /

The three toughest questions at your bankruptcy hearing.

The three toughest bankruptcy hearing questions are NOT what most people expect.  The bankruptcy trustee does NOT ask you to explain how you got into this mess. They are not asking about your plans for the future.  And the creditors are NOT there demanding their money.

Have You Sent the Bank Statements?

So what are the hard questions? For most people the toughest bankruptcy hearing question is: Have you sent us all your bank statements, showing the balance on the day you filed your case? Especially if you have old accounts you don’t think about because you never use them–getting those bank statements in can be a tough challenge.

Can You Find The Mute Button?

One bankruptcy trustee question: Can you mute your phone?

Finding the mute button can be a challenge for your bankruptcy hearing. Progressive uses it as a joke in one of their TV ads.

The next bankruptcy trustee question is, can you find the mute button on your phone?  People who do conference calls at work figured out the mute button long ago.  For other people it’s a challenge.  (Progressive Insurance uses a mute button as a joke on one of their TV ads.)  

The bankruptcy court in Alabama has mute button instructions on their webpage. 

Why is the mute button important?

When you call into your bankruptcy trustee, there will be almost thirty people on the line.   About twenty people filing bankruptcy, maybe eight lawyers, plus the trustee and helper.  

Everybody needs to be on mute when it’s not their turn. Otherwise the background noise–fans, computer noise, barking dogs, children–the background noise makes it impossible to hear.  So, be sure you can find and use the mute button.

Can I Whisper to My Lawyer?

The third toughest bankruptcy hearing question is your question, not a bankruptcy trustee question. Your question is, how do I talk to my lawyer?

When you dial in to the trustee phone number, you don’t know that whether I’m there.  (And I don’t know if you’re there, either.) That’s the biggest disadvantage to doing these on the phone. 

You for sure want to know I’m on the call and you might have a last minute question, too. You can’t ask me a question out in the hall because there is no hall.

We can’t whisper–because we are broadcasting to the whole room. That why we need to email each other ten minutes before the hearing starts.

I’ll shoot you and email letting you now I’m on. Please reply. And email any last minute questions. Use robertrossweed@gmail.com. That goes straight to me.

(We’ve been doing these bankruptcy trustee hearings by phone for ten months now. And I overhear a lawyer whispering with their client almost every hour. And of course the whole room hears it.  So far I haven’t overheard anything really bad–like, I’m sure glad they didn’t ask about that farm in Kentucky. Anyway, you and I won’t do that. We know to whisper by email.)

 

 

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31

Jan 2021

File Bankruptcy and Sleep Better

Posted by / in Blog, Weekly Posts /

People who file bankruptcy sleep better.

Ninety four percent of people surveyed said they slept better after filing bankruptcy.

That’s the result of a 2019-2020 study taken through SurveyMonkey.com of former clients who filed bankruptcy with us three or four years before.  One hundred four people participated in the survey.     

Ninety four percent sleep better after filing bankruptcy

Ninety-four percent of people report sleeping better after filing bankruptcy.

Getting good sleep is very important for good health. 

People who get enough sleep are less stressed.  And less stress helps people sleep. It works both ways.

While people discuss the financial benefits of filing bankruptcy, the enormous health benefits can be overlooked.  

We did similar survey in 2011 and got almost the same answer.

In 2011 88% said they slept better after filing bankruptcy.

Lack of sleep increases your risk of cancer and heat disease and affects your mental and physical abilities.  

Rosalind, from Leesburg, said this:  I was depressed and very stressed when I came to Mr. Weed due to my illness and with mounting medical debts. I now sleep better, my stress level is down and I feel so much better.

Here’s Contrell, of WoodbridgeMr Weed is hands down the best bankruptcy lawyer in the DMV. I sleep well at night. I thought with my income it was impossible to achieve a debt free life style again within 6 months my credit score was in the 700’s.

Next is Betsy, from Sterling: Thanks for everything.  I can sleep better now.

 

 

 

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31

Jan 2021

Forbearance Might Not Mean Deferment

Posted by / in Weekly Posts /

A Mortgage Forbearance Might Not Get You a Mortgage Deferment

A mortgage forbearance under the CARES Act is NOT the same as a deferment.

At the end of a mortgage forbearance, you are behind by the exact number of payments they allowed you to skip.  A deferment means you are not behind.

Mortgage companies are handing out forbearance agreements left and right, to allow people to skip some house payments because of the covid crisis. The mortgage company agrees in November 2020 (for example) that you don’t need to make a payment until May 2021. So far that’s a forbearance.

When May 2021 comes, they can say, ok now you are six months behind!  What?

Forbearance is not a deferment

After a six month forbearance, you are six months behind. You are behind for the payments they said you could skip.

When the mortgage company gives you a forbearance they agree they won’t pester you for a payment.  But you still owe those payments!

They Are Supposed to Work With You to Change the Forbearance into a Deferment

Back to the CARES Act.  The mortgage company cannot demand the whole six months all at once.

But the burden is on you to “make arrangements” to pay.

What kind of arrangements?

If you are still struggling financial, you can ask for a loan modification.  You can ask for lower payments, based on lower interest rate, or stretching the loan out longer. They don’t have to give you a modification, but you can ask.

A deferment means they take those six months you skipped and put them on the end of the loan.

A repayment plan might be something like this: since you skipped six months, we want double payment for the next six months.

This is all new

Since this is all new, nobody knows whether the mortgage companies will be reasonable when these mortgage forbearances run out.  Congress, when they passed the CARES Act, expected them to be reasonable. And the mortgage companies learned something from the housing crisis.   Looking back to 2007 and 2008, the mortgage companies probably hurt themselves by forcing foreclosures instead of working with people.  (Obviously, they hurt the homeowners way more than they hurt themselves.) They started to figure that out in about 2010.  So we can hope they will work with you, but there’s no guarantee.

How the Problem Pops Up in Bankruptcy

The reason that people ask for a forbearance can be the same reason they need to file bankruptcy: not enough money.

And when people file bankruptcy in the middle of a forbearance they think they are current on their mortgage–and shocked to find out they are NOT. Unless the forbearance has been turned into a deferment, those months you skipped under the forbearance are now months you are behind. So, you’re behind on the mortgage and now filing bankruptcy? The mortgage company can start to panic.

Bankruptcy Strategies

If people can wait, I suggest we hold off filing bankruptcy until the forbearance has definitely been turned into a deferment.  Or a loan mod.

If we can’t wait, you need to plan a full court press on the mortgage company as soon as the bankruptcy is filed. It’s vital to let them know you are NOT giving up the house (unless you are) that you want a deferment or a loan mod, and that you’re glad to send them whatever papers they need to approve you.

It is vitally important to stay in touch.

 

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NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES