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05

Apr 2014

Virginia Chapter 7 Bankruptcy

Posted by / in Chapter 7 Bankruptcy, Weekly Posts / No comments yet

The Bankruptcy Law Office of Robert Weed led all attorneys in Virginia Chapter 7 bankruptcy case filings in 2013.

Virginia Chapter 7 bankruptcy

We did more Chapter 7 bankruptcies last year than any other Virginia lawyers.

That fact was announced just recently by 722 Redemption Funding, a company that finances cars for people in or just out of chapter 7 bankruptcy.   You can see their full report here.

For most people who are in financial trouble in Northern Virginia Chapter 7 bankruptcy brings immediate relief from financial pressure, and the chance to build back to good credit in three years.

Compared to Chapter 13, Chapter 7 for most people offers more immediate relief and quicker return to good credit.  (Happiness, too–a survey we sponsored with SurveyMonkey showed 93% of our clients said life was better after bankruptcy.  You can read that here.)

The simple reason Chapter 7 is better than chapter 13, is Chapter 7 is over.  Chapter 13 runs on, usually for five years.

The 2005 bankruptcy reform law tried to push high income people into Chapter 13.  Northern Virginia is a high income–and high cost-of–living area.   Since Chapter 13 is much worse for your credit than Chapter 7–and much more likely to fail–I push back.

Usually if high income people are talking to a bankruptcy lawyer, there’s a reason why there’s a financial problem.  I try to find that reason–and use it to qualify people for Chapter 7 (if Chapter 7 is better for them).

 Virginia Chapter 7 Bankruptcy Automatic Income Eligibility

The median income figures for Virginia were just updated as of April 1, 2014.  Families that are below the median income automatically have income eligibility to file Virginia Chapter 7 bankruptcy.

Families with more income, do not have automatic eligibility.  They need to prove why they should be eligible.    That means carefully analyzing their budget under the bankruptcy means test.  I explain more about that here.

Here are the cutoff numbers, by family size.

                                                        One                              Two                             Three                            Four

VIRGINIA$52,576$66,470$76,884$92,277

 

Families with income over these numbers can still have income eligibility for Chapter 7.   But they have to work to prove it.  An experienced Virginia Chapter 7 bankruptcy lawyer can help.

(I should say here that for some people even with income eligibility for Chapter 7, Chapter 13 is better.  Chapter 13, for example, is better that Chapter 7 in dealing with student loans, or with unfiled taxes, and sometimes with divorce problems.  For most people who don’t have those problems, Chapter 7 is better.)

 

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27

Dec 2013

Bankruptcy and your co-signer’s credit report

Posted by / in Chapter 7 Bankruptcy / 2 comments

 What happens to your co-signers when you file a Chapter 7 bankruptcy?  Can you avoid damaging your co-signer’s credit report?

It used to be that if you filed bankruptcy, your co-signer’s credit report would immediately show the account as “included in bankruptcy.” That happened even if you or the co-signer kept paying the account on time.  It was automatic.

Why?

The standard credit reporting system, then known as Metro, provided for credit reporting by accounts.  If an account was in bankruptcy (because one of the people on that account filed bankruptcy), the bankruptcy showed up on the report of everyone who was on that loan.

That problem is NOW  rare.

In the late 1990’s, the credit bureaus phased in a new system called Metro 2.  Metro 2 was designed to allow for “complete identification of each consumer (including co-debtor, co-signer, etc.)”  So the account could–and should–be reported are bankruptcy on the person who filed bankruptcy and current (if it is current) on the person who did NOT file bankruptcy.

Protect your co-signer's credit report

The Consumer Industry Association established Metro 2 in the late 1990’s–so a debt could show bankruptcy on the person who filed bankruptcy, and current if the cosigner is paying it current.

The credit bureaus did this for two reasons.  First, because it was more accurate; second they were afraid of getting sued.  (And they did get sued, in a case called Clark v Experian.    You can read about that here.)

Still, if you file a bankruptcy, and you have a co-signer, and you, or the co-signer, is still paying the debt, check your co-signer’s credit report.  Better check it twice, actually.  Once about the time of your bankruptcy hearing.  And again, three months after your bankruptcy discharge.  (I explain here where to go to get the right credit reports to check.)  WARN your cosigners!

I still see this problem, maybe once a year.  (The reason I’m writing this blog, actually, is this problem popped up today, December 27, the first time I’ve seen it in 2013.)

One reason may be that some credit card companies may still be using Metro, instead of Metro 2.  In 2006, the Federal Reserve reported to Congress that half the credit reporting was still being done on the old Metro system.

If half the companies had not updated seven years after the new system was put in place, I suspect many still haven’t, another seven years later.

 

PS  What if no one pays the debt?  Your co-signer’s credit report will definitely get hit!

If nobody pays the co-signed debt, then there will and should get a bad notation on the co-signer’s credit report.  The debt will show up as bankrutpcy on you, and as late–and probably charge off–on your co-signer.  “Charge off” is a “major derogatory” on someone’s credit.  Maybe as bad, or worse, than a bankruptcy.

 One More Reason I like the Credit Report at Experian.com/reportaccess.

I like to talk about this during my consultation with people who are thinking of filing bankruptcy.  And the experian.com/reportaccess credit report is usually accurate on telling us when you have cosigners.  (Sometimes people have forgotten.)  Other credit reports aren’t as good, including other Experians.

 

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16

Jun 2012

Bankruptcy Second Opinion: Why Chapter 13?

Posted by / in Chapter 13 Bankruptcy, Chapter 7 Bankruptcy / 60 comments

Two people in Chapter 13 bankruptcy plans came to see me this past week for a second opinion.  I told both that for them, Chapter 7 bankruptcy was better.

Legal ethics allows me to give a second opinion to people who already have a bankruptcy lawyer.  (I don’t like to do that because it really hacks off the other lawyer.)  These folks didn’t have a bankruptcy lawyer.

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NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES