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18

Nov 2018

Three months later, Mike’s After Bankruptcy Credit Score is 681

Posted by / in Weekly Posts /

Three months later, Mike’s After Bankruptcy Credit Score is 681

Last Friday, Mike sent me this screenshot, showing his after bankruptcy credit score is 681.

After bankruptcy credit score

Three months later, Mike sent me this screenshot.  Mike’s after bankruptcy credit score is 681.

 

 A 681 credit score is, barely, considered a “good” score by Experian and CreditKarma. 

Mike had filed bankruptcy with me in April and it was approved and done in September.  So his score was what many lenders would call “good” just three months after bankruptcy.

Mike and I did a little extra work to get there.

I tell people that your credit score two months after bankruptcy, should be between 600 and 640, according to studies done for the Federal Reserve.    

Mike’s score was a little low, so I told him to send me his credit report, so we could look at it together.  

Together we found the culprit.  His credit union reported him as late for the four months he was going through the bankruptcy.  Then they got it right.

It seemed like a small thing, but Mike and I disputed it.  

The 681 credit score was the result.

Your After Bankruptcy Credit Score is Part of My Five Year Warranty.

I encourage all my clients to send me their credit reports, if their after bankruptcy credit score is less than 600.

That’s part of my five year warranty. 

For most people, bankruptcy is a powerful tool for credit repair.  That’s why it’s so important for a bankruptcy lawyer to also understand the Fair Credit Reporting Act.  

If your credit report and credit score have after bankruptcy mistakes, then you haven’t really gotten the fresh start that’s your right under the bankruptcy law.

All I Do is Bankruptcy Law.

That includes checking your after bankruptcy credit report and after bankruptcy credit score.

 

 

 

 

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05

Aug 2018

How a cheap car payment can help you on the bankruptcy means test.

Posted by / in Before Bankruptcy, Chapter 13 /

How a cheap car payment can help you on the bankruptcy means test.

The 2005 Bankruptcy law, known BAPCPA or sometimes BARF, was designed to make bankruptcy much more painful for families making over the average income in each state.  For Virginia, in the summer of 2018, that’s $103,549 for a family of 4. Or $111,949 for a family of five. 

Bankruptcy means test applies to families of 5 over $111,949

Bankruptcy means test applies to families of 5 over $111,949

The bankruptcy means test determines whether families making over that average income can be approved for Chapter 7 anyway.  And if not eligible, how much they have to pay for five years in Chapter 13.

The bankruptcy means test formula is arbitrary.  It was designed to be arbitrary. Congress, and the credit card companies, thought that bankruptcy judges were too easy.

Most families around here, making too much to get approved for Chapter 7, end up failing at Chapter 13. Without careful Chapter 13 planning, the bankruptcy means test will put you into a Chapter 13 plan that you are not able to afford for five years.

Here’s one example where careful Chapter 13 planning can make all the difference. 

John and Tanya is live Woodbridge in a house they own with two children.  John is stationed at Joint Base Andrews; Tanya is home with the kids, one child needing special attention.

Trying to handle the debts, they have gotten by as a one car family, and John’s car now has 110,000 file on it.  

If John and Tanya go into Chapter 13 now, they get a budget allowance of $497 for the car payment (regardless of what the payment really is) and $221 for gasoline, car repair and car insurance.  It will be impossible for John to hold his car operating expenses, gas, repairs, insurance, below $221 for five years on a car that already has 110,000 miles.

John and Tonya  talk to me before their credit is totally shot. So I can point out to them that they are much more likley to survive Chapter 13 for five years, if they go out and get a low payment second car now.

Tanya buys a brand new Nissan Versa, sale price $13,500, at 4.5% for five years. Her payment is $227.00 monthly.  That $227 payment counts as $497 on the means test.  That frees up for the family budget $270 a month. (That’s $497 means test ownership allowance, minus the $227 actual payment.) That $270.00 can go to pay things like sports for the kids, which the bankruptcy means test budget does not allow.

And they get a second $221 monthly for operating expenses.  John drives the new Nissan Versa to work, and Tanya takes the older car for errands around town. They can hold their gasoline, repair and insurance below the new total operating allowance of $442.

(I should note here that it would be illegal for me to tell John and Tonya to go out and finance a car.  But it was legal for me to tell them that it’s legal for them to do it.)

People say that bankruptcy should be a last resort. But you don’t want it to be a last minute, last resort.  Careful Chapter 13 planning is very important for getting the best result.

 

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14

Jul 2018

Another Family Wastes Thousands with Freedom Debt Relief

Posted by / in Weekly Posts /

Another Fairfax County Family Wastes Thousands with Freedom Debt Relief.

I filed a bankruptcy case this week for Alexander and Alina yesterday.
 
They had been enrolled with Freedom Debt Relief for over five years–the longest enrollment I ever heard of. And according to Freedom Debt Relief, they had only four monthly payments to go until everything was settled.
 
So why were they coming to see me? During that same five and a half years, they had two cars repossessed, and their townhouse went to foreclosure. Trying to “resolve” your credit cards when you can’t make the car payment is NOT a good idea.
 
But one other thing hit me. Although Freedom Debt Relief said all but one of the cards has been settled and paid, their credit report was very different. The Experian credit report showed only one card as settled, and the other five were still reporting monthly as late.
 
So whatever “settlement” Freedom Debt Relief did, it did NOT include getting the creditors to report paid in settlement on the debts. Seeing that credit report brought my low opinion of Freedom Debt Relief even lower.
 
(True story except I changed the names of Alexander and Alina.)

 

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07

May 2018

After Bankruptcy, get a credit card

Posted by / in After Bankruptcy, Weekly Posts /

After bankruptcy, get a credit card. Get a couple.

Getting back to good credit is one of the five ways bankruptcy gives you a new start. The bankruptcy itself helps quite a bit, because the old debts stop chasing you. But to really improve your credit score you have to get and use two or three after bankruptcy credit cards every month. Using credit responsibly leads to a higher credit score, than just having no debt.

Graph showing after bankruptcy credit cards

Getting an after bankruptcy credit card, using it, and paying in full, is a good way to improve your credit.

I reccomend getting about three after bankruptcy credit cards, using them each month to charge something you need, like gasoline or groceries, and paying them in full.

About the time of your bankruptcy discharge, you will get some after bankruptcy credit card offers in the mail. But you should compare those with offers you might find on the internet. I think bankrate.com is a good place to shop for credit cards for people with bad credit. (Right after bankruptcy you are a person with bad credit; if you follow these steps, you soon won’t be.)

When deciding what card to apply for, keep in mind that you are planning to pay the card in full every month. That means you really do NOT care what the interest rate is. You won’t be paying interest because you’ll be paying it off each month. What you want to low or no application fee; and low or no annual fee.

If you can only get approved for one card as soon as the bankruptcy is discharged, that’s ok. Using that first after bankruptcy credit card for a few months, charging and paying off, charging and paying off, will raise your score. So better offers will come your way.   

Here’s a sample of a credit card offer one of my clients got in the mail, about six weeks after her Chapter 7 bankruptcy was discharged.                             

 

 

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26

Apr 2018

After Bankruptcy, check your credit score

Posted by / in After Bankruptcy, Weekly Posts /

After Bankruptcy, check your credit score

Most people have a credit score of about 620 a couple months after bankruptcy.  That’s from a study by the Philadelphia Federal Reserve Bank, a few years ago. (I saved the complete study here.)  And here’s the full size Chart that shows how scores recover.

Credit score bounces back after filing bankruptcy. From Federal Reserve.

Study shows how credit score bounces back after filing bankruptcy.

 

What’s your after bankruptcy credit score?  One free place to check is Lendingtree. Here.    

Now I can’t guarantee that your score will be 620.  But, if I handled your bankruptcy case and your score is NOT what it should be, follow these instructions and send me your credit report.  We’ll see if there’s something hitting your credit that shouldn’t be there.  

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26

Apr 2018

For your bankruptcy hearing, you’ll need your Social Security Card

Posted by / in Weekly Posts /

Everyone is required to bring their social security card to their bankruptcy hearing. And a lot of people have lost theirs over the years.
 
Virginia was recently added to the states where you can use your drivers license and apply on the internet to get a replacement card sent to you.
 
You don’t have to go to the Social Security Office; you can now do it on the internet.
Here’s the link.

https://www.ssa.gov/ssnumber/

 

 

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NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES