Paying Your Mortgage with Money Order is a Bad Idea

Posted by Robert Weed / in After Bankruptcy, Blog, Chapter 13, Weekly Posts /

Paying Your Mortgage with Money Orders is a Bad Idea

Handing somebody a money order to buy a car or something–that’s sometimes safer than cash.  But mailing a money order to pay your mortgage–that’s almost always a bad idea.

Let me tell you about Norman.  Norman filed Chapter 13 bankruptcy with different lawyer.  He later came to see me in a panic. Selene, his mortgage company, has started to foreclose. “So have you paid on time for the fifteen month since the bankruptcy was over?” I asked.  “Absolutely,” he replied.  That was Friday.  Sunday afternoon, he sent proof.  Eleven cancelled checks and four sets of Western Union money orders.

We need to move quickly to stop that foreclosure but I don’t really have proof he made the payments. The cancelled checks–they show Selene got them.  But the money orders; who knows where they actually went.

Getting Proof from Western Union

We are sure glad Norman kept his receipts.  Western Union money orders have form on the back he can mail in–with $15.00–to track if the money orders were cashed.  And by whom.  That will be a total of $240 to track sixteen money orders.  (Western Union money orders are limited to $500; so Norman needed four money orders for each mortgage payment.)

If they haven’t been cashed, he can get his money back. If Selene cashed them, we can prove the mortgage is current. Meanwhile, the clock is ticking toward foreclosure.  Because Virginia foreclosure law was changed a few years ago, we do have enough time to work with. But no time to spare. 

Selene Violates Regulation Z and Makes This Problem Worse

When Norman filed for Chapter 13 bankruptcy, Selene stopped sending monthly to him. As far as I can tell, that’s their national policy. (I’m suing Selene because of that.) Regulation Z requires mortgage companies to send periodic statements. And expressly says that bankruptcy is NOT an excuse to stop sending statements.

If Selene had sent monthly statements, Norman could have seen right away if the money orders weren’t being properly credited.  When the case was over and Selene started sending statements, Norman couldn’t figure out what was going on.  We went to the Selene website to download the past monthly statements.  But they would only give us six months of past statements.

 

 

 

After Bankruptcy: Please Don’t Go Out and Co-Sign for a Car

Posted by Robert Weed / in After Bankruptcy, Weekly Posts /

After Bankruptcy: Please Don’t Go Right Out and Don’t Co-Sign for a Car

Got an email last week that made me sad.  Cherry filed Chapter 7 bankruptcy back in 2017.  She recently went to buy a car and ended up getting financed by Santander at 21%. After she did that, she asked why is her credit score so low, four years after bankruptcy?

When I looked at her credit report, here’s what I saw. Two months after her bankruptcy was discharged, she got a car loan with Regional Acceptance.  Regional Acceptance finances cars at terrible rates for people with terrible credit.  

I asked her, didn’t I warn you not to try to finance a car until at least two years–three is better–after the bankruptcy?  She said she didn’t “finance” a car: she just “co-signed for a friend.”

(The friend, of course, only paid for a year; and then the car got repossessed. Obviously the friend had really bad credit; so bad that Cherry right out of bankruptcy was needed as a co-signer.)

Instead of having the best credit of her life, four years after bankruptcy, Cherry’s score is stuck in the mid 500’s.  And Regional, if they bother, has two more years where they can sue and garnish her.

Two lessons.  First, if you have any way at all to get to work, do not finance a car until two years after your bankruptcy is discharged. Second, don’t co-sign for anybody whose credit is worse than yours. Ever.   

Please Don’t Co-Sign for a Car and Mess Up Your New Start in Life

Improving your credit score is one of five ways that bankruptcy gives you a fresh start.  Three years after bankruptcy you can have as good a credit score as anyone you know.  Don’t mess that up.  Don’t co-sign for a car for a friend.

 

 

 

 

Does Reaffirming Your Car Loan Help Your Credit Score?

Posted by Robert Weed / 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

 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.