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16

Jul 2019

Reaffirmation: It’s like an episode of Law and Order.

Posted by / in Chapter 7, Weekly Posts /

“What was that? Law and Order?”

Today I was at the bankruptcy court asking the Judge to approve two credit card reaffirmations. One for a little more than $500; one for a little less.

Both because my clients had a good relationship going back years with their credit union. So they wanted to keep them.  (Reaffirmations require approval by the judge; and the judge is supposed to go easier on credit union reaffirmations. See 11 USC §524(m)(2))

Since the judge is supposed to go easy on credit unions, I thought we had a good chance of getting them both approved.

The Judge approved the one for less than $500; but she turned the other one down.

Bankruptcy Judge will turn down your reaffirmation

If the bankruptcy Judge thinks there’s any question about your ability to pay, she will turn down your reaffirmation.

“What was that?” said the wife of the consumer whose reaffirmation was approved. “Was that like, Law and Order?”

Our Judge does NOT like reaffirmations. So, if you want your reaffirmation approved here, the judge will go line by line through your budget. “What’s this dental insurance?” “How much is your car payment?”

The consumer whose reaffirmation was turned down is divorced, and said she often doesn’t get her support paid on time. That was enough to get her turned down.

The one that was approved was a married couple, both with steady work, and no kids.

If the judge thinks there’s any question at all that you can’t afford to pay–even on a bill that’s only $17.00 a month–she’ll turn it down.

In a simple Chapter 7 case here in Alexandria Virginia, your bankruptcy is approved in a three minute trustee hearing.

Getting a reaffirmation approved is seven minutes of tough cross examination by the Judge.

 

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13

Jul 2019

Credit scores after bankruptcy are close to national average, in just three years

Posted by / in After Bankruptcy, Blog, Weekly Posts /

I just finished a survey of people who filed bankruptcy with me three years ago. Here’s one big thing I found out: credit scores three years after bankruptcy are almost the national average.  

Right about half of the people who filed bankruptcy with me three years ago have a score above 670. A 670 score is considered “good” by Experian.  That’s a little less than the population as a whole, where 60% of people are above that 670 score. 

Some people will be surprised that credit scores after bankruptcy are that high. 

There’s an urban legend that you have to go for seven years with bad credit after bankruptcy.  People tell me all the time they expect to go seven years with bad credit. Other people wonder if there credit score will drop below 400.  

Have you heard anything like that?  It’s not true. 

Besides this survey of people who filed bankruptcy with me, I can point you to two studies by the Federal Reserve.  The Federal Reserve Bank of New York found that “the individuals who go bankrupt experience a sharp boost in their credit score after bankruptcy.” And, the Philadelphia Federal Reserve found that people with a before bankruptcy 540 can expect an after bankruptcy credit score of around 620.

Debt settlement scammers, nosy family members, and some financial gurus will want you to think filing bankruptcy ruins your credit.  But, none of them will put it in writing, because it’s just not true.

I’m surprised the credit scores after bankruptcy aren’t higher.

I think nearly everybody can get their credit scores above 670 three years after bankruptcy.

credit scores after bankruptcy go up

I think nearly everybody should have a credit score after bankruptcy above 670 in three years.

The answer is in another question from my survey. My survey asked people if they got a new credit card in the first year after the bankruptcy. And 43% said, “No.”  That’s a problem.

People tell me, when we go to the bankruptcy hearing together, “I never want to see another credit card.” But, if you want a good credit score after bankruptcy, you have to.

Bankruptcy freezes your old bad credit, it doesn’t erase it. So you need to build good credit on top of it. 

That means you need to go out and get a credit card.  (You’ll get some offers in the mail, but you can also internet search ‘credit scores for bad credit.’) Charge gasoline every month; pay it in full every month.  In that way, within six months you’ll get several more good offers; use each card once a month and pay them in full.  Each week use a different credit card to charge your gasoline, and pay them all in full.  You want to get credit cards with higher credit limits, but you want to keep your actual balances low.

Summary What Does it All Mean?

If you are considering bankruptcy, don’t believe the urban legends. Three years after bankruptcy, your credit can be almost as good as new.  If you have filed bankruptcy, don’t turn your back on your credit. Carefully build a yourself a good credit score after bankruptcy.

Want to find out more on your after bankruptcy credit score? 

After bankruptcy, check these five websites. 

After bankruptcy, getting your credit report right.  

Mike’s after bankruptcy credit score is 681.

 

 

 

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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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NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES