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Feb 2011

After bankruptcy: worried about your tenants?

Posted by / in After Bankruptcy / 40 comments

Lots of people I see filing bankruptcy are landlords.

They’re not people who wanted to be landlords.  I’m talking about people who are renting out a house they cannot sell.  (Because the value has dropped way below what they owe.)

Virginia bankruptcy lawyer Robert Weed

Lots of people who talk to me about bankruptcy are landlords

They often come to see me when they realize they can’t afford to take the monthly loss on the rent, either.   And so we talk about filing bankruptcy to get rid of the house.

When they decide to file bankruptcy to get rid of that house, they ask about their tenants.  People don’t want to leave their tenants high and dry.

If you are in that situation, here’s good news.   A law signed by President Obama protects your tenants after foreclosure.  The foreclosure buyer cannot just evict your tenants.  The tenants have at least 90 days to find a new place to live and move out.

Here’s how that would work.

Suppose you come talk to me in January and we decide that you need to file bankruptcy.  You stop paying the mortgage on that rental property in February and file bankruptcy at the end of March.

Your mortgage company would probably get relief from the automatic stay in early May.  “Relief from the automatic stay” means permission from the bankruptcy judge to foreclose.   In Virginia, the foreclosure sale might be scheduled around the Fourth of July.

Then, under the “Protecting Tenants At Foreclosure Act,” the bank or foreclosure  buyer has to give the tenant 90 days notice to leave.   That’s October.

So, we are talking nine months from your decision to file bankruptcy before your tenants have to leave–plenty of time for them to find another place.

(This protection does not apply if the “tenants” are members of your immediate family.)

Just letting the place go to foreclosure without filing bankruptcy is not a good idea.  The mortgage company can still come after you.  (Often the first mortgage will not, but the second, if there is one, certainly will.) And, if you broke the lease, so can the tenants.

(All this has application if you’ve already moved out of your house and it’s vacant.  Especially if there’s a high condo fee,  the bank may be very slow to foreclose.  And as long as you are owner, you are liable for the condo fee.  Even after the bankruptcy is filed.   Rather than take that loss, make a little money.  Rent the place!)

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Jan 2011

After bankruptcy discharge: Getting back to good credit

Posted by / in After Bankruptcy / 166 comments

After bankruptcy discharge: Getting back to good credit

About two months and two weeks after your bankruptcy trustee hearing, you should get your bankruptcy discharge.

bankruptcy hearing

You should get your bankruptcy discharge about two months and two weeks after your bankruptcy hearing

When you get the discharge, it’s time to go to work on your after bankruptcy good credit.

To get back to good credit, you need to get a credit card.

Most people get a couple credit card offers in the mail.  You may have to pay $139.00 application fee to get a $300.00 credit card.

A $300.00 credit card can get you something that you really need–good credit after bankruptcy.  Charge gasoline, or something you have to buy anyway, every month.  Pay it in full every month.

After about six months, you’ll start getting pre-approved $1000.00 credit cards.  I recommend you get three or four.   (It helps your credit score to have higher credit limits–as long as you don’t use those high limits.)

Each week, drive around with a different credit card in your pocket and use it to charge that week’s gas.  Each month when the bills come, pay them in full.  (You are NOT trying to get back in debt.)

Three years of doing that and you’ll be back to good credit again.

What if I don’t get any after bankruptcy credit card offers?

Here’s the credit card page at bankrate.com. At the drop down window, search for “cards for bad credit.”  They show about 40 cards.  

After bankruptcy credit help from woodbridge va bankruptcy lawyer and bankrate.com

Bankrate.com credit card page, search for “bad credit,” has cards you can apply for after bankruptcy.

Look for a card that tells you they report to the three credit bureaus.  I see Orchard Bank Mastercard and Visa, the Capital One secured Mastercard, the Public Savings Bank secured Visa, and the Applied Bank Visa Gold card.  Try one or two of those.

Is there anything else to improve my after bankruptcy credit?

Here’s a trick that works wonders if it applies to you. If there’s a credit union where you work, and you didn’t owe them any money in your bankruptcy, they might help you with a loan secured by your share savings account.

Here’s how that works.  You put $200 in a savings account at the credit union. The credit union then lends you $200 until the next payday. You make a direct deposit that pays off the loan out of each paycheck. Then you borrow the money again.

This means you are paying interest on your own money. But it does wonders for your credit score. An example of what I mean is the Apple Federal Credit Union “Share Secured Loan.”

Does paying my car loan help my after bankruptcy credit?

One question people often ask me:  Since I am paying my car loan, doesn’t that help me get back to good credit? The answer to that is, No. Unless you reaffirm your car loan–which I really do NOT recommend–you car is going to show on your credit as “discharged in bankruptcy.” That’s even if you continue to pay.

Here’s the reason for that. Even if you didn’t want to “include” your car in the bankruptcy, you can change your mind at any time. All you have to do is stop paying. They can–and will–repossess your car. But they cannot come after you for the money. They also cannot legally hit you with a repossession on your credit report. The bankruptcy protects you.

That’s why the credit bureaus show “discharged in bankruptcy” on your car loan–even if you are (now) still paying.

How important is my after bankruptcy credit?

Many people right after bankruptcy get offers from a car dealer.  Within a few months, you’ll be able to get approved for a car loan–at about 29%!!  You do not want to do that.

At 29% interest, you pay $18,000 in interest over five years on a $20,000 car.

If you work hard to rebuild your credit over three years, you should be able to get a car loan at less than 8%.    (People in my after bankruptcy happiness survey reported 6.9% and 5.9% can loans. Some people, like Alice, are able to do a lot better.)  At 8% over five years you pay $4000 in interest on a $20,000 car.   That’s a difference of $14,000!

Each month that you do what I say–charge three tanks of gas and pay your cards on time–you knock almost $400 off what that car will cost you in interest!  So please.  Spend the next three years building back to good credit.  And do not buy a car–if you have any way at all to get to work–until you’ve worked for three years rebuilding your after bankruptcy credit.

Getting your after bankruptcy credit report right.

A judge in California gave the credit bureaus have two months from your discharge to get your credit report right.    (So there’s no need for you to pull your credit report before that two months is over.)  The credit bureaus do get your credit report right most of the time. But not all of the time.  

That’s why my office is ready to check your and fight for you if they are not right.  We’ll check your credit report, but you have to get them to us.  (Over the years I’ve tried various strategies to get them for you–but they have eventually outsmarted me on all of them.)

Here’s what to do.  Three months from your discharge, please download your own credit reports and send them to us.

Please go to:  annualcreditreport.com.  (And please AVOID freecreditreport.com.)  You can get one free credit report each year from each of the three bureaus at annualcreditreport.com.

Another way to get the credit reports, is to call the 800 numbers of each of the three credit bureaus.

Equifax        1-800-997-2493

Experian      1-888-397-3742

Trans Union 1-800-888-4213

Please make a copy and mail them to us.  Or print them to pdf and email to:  robertweed@robertweed.com.

One more thing–these credit reports are evidence.  (At least if there’s something wrong and we sue, they are evidence.)  For them to be evidence, we have to get them from the credit bureaus at one of the places they have designated.

Not from 3 in 1 resellers.  Not from someone like freecreditreport.com.  Anything that’s in a three column format won’t be good evidence.

Each credit bureau sells all three–and makes money doing it–but those aren’t good evidence.  What Experian sells you as an Equifax report isn’t evidence of what Equifax is really saying.

You may subscribe to a service that alerts you when bad stuff hit’s your credit.  Those services can be a good thing.  But we can’t use those “third party” credit reports for either a dispute, or a legal action.  I explain more,  here.

Also, please don’t write on them.  If you have some comments or questions, please email them or send them on another sheet of paper.  Thanks.

Getting your after bankruptcy credit report right could save you hundreds of dollars, or even thousands, when you are ready to buy a car after bankruptcy.  So please get back in touch with us.


new-banner2PS  Our promise to help you with bankruptcy errors on your credit report is good for five years.  We’re starting to see errors pop up years after bankruptcy.

Jeff had a house got to foreclosure in 2008; and filed bankrutpcy with me in 2009.  Suddenly, without warning, Ocwen started hitting his credit with 180 days late in December 2010.  Jeff did a dispute, and, as back up, we filed papers in front of the bankruptcy court.  By March it was fixed.  (Since the dispute fixed it, we weren’t able to get any money for Jeff.)

Chris filed bankruptcy with us in 2011–and in the summer of 2013–Green Tree started hitting his credit report.  Green Tree started calling, too.  We complained to the bankruptcy judge about that double violation–and Green Tree made it right.

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Nov 2010

Bankruptcy, Mortgage Companies, Your Credit Report Code Q

Posted by / in After Bankruptcy / 68 comments

On your after-bankruptcy credit report, your mortgage is the account most likely to be wrong.  What the mortgage companies do is far worse than HSBC (see my Nov 22, 2010 blog).  HSBC just parks your late status and doesn’t update showing bankruptcy.  The mortgage companies often update every month, saying you are late and getting later.

This leads me to two questions.  Why are they doing this?  And how?

The credit bureaus promised the judge in the Terri White class action they wouldn’t allow this.  They promised to block creditors from updating late accounts  after bankruptcy.  (The exceptions are things the bankruptcy doesn’t clear up–like child support and taxes.)

So how are they getting away with it?

The answer is in the credit reporting instruction manual, published by the three credit bureaus.  The manual, called Metro 2, includes about a dozen codes for bankruptcies.  Chapter 7, chapter 13, discharged, dismissed.

One of those codes, Code Q, means ignore the bankruptcy.  We’re seeing mortgage companies report a code Q–ignore the bankruptcy–to the credit bureaus.  And then they start reporting people late again.  The credit bureaus are using that code Q as their reason (or excuse) to let the mortgage companies keep up late reporting on debts that were cleaned up in the bankruptcy.

But why?  It doesn’t make sense.  I can understand HSBC parking a three thousand dollar credit card on your credit report.  Three or four years after the bankruptcy, especially if you’ve lost contact with your lawyer, you might go on and pay it to clear up your credit.

But nobody can afford to pay a $100,000 mortgage to fix their credit.   Can they?  (Recently I had a client call Bank of America to complain about a mortgage still showing a past due balance after bankruptcy.  And Bank of America told her, “now that the bankruptcy is over you still have to pay.”)

So maybe they think they can hammer people into making payments when they don’t have to, just by continuing to hit their credit.   (Even if only one person out of ten thousand does it,  they’d come out ahead, since it basically doesn’t cost them anything.  Unless they get sued for it)

I’ve sued on three of these cases so far–got the after-bankruptcy credit report fixed and got people a little money.   My clients were happy to settle for that.

I have another one of these cases going now–and my client is really hacked at her mortgage company.  (She works in the finance industry and knows how much this hurts.)   So I hope we can keep the case going a little longer–long enough to make the mortgage companies explain what they think they are doing.

When I find out, I’ll post it here.

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